It’s not often that I think about the rental market, as let’s be honest I’m in the business of assisting buying or selling houses. However there was a statistic on twitter last week which caught my eye – the number of homes to rent in London has fallen by 17% within the last year (HomesProperty).
This is a huge number, especially as demand for housing across the Capital (and rest of the country) continues to grow. In my mind there is a very good reason as to why this has happened; the demise of the Buy-to-Let market following the hike in stamp duty, coupled with the tax restrictions imposed on landlords from last April.
We know that the BTL market once accounted for around 18% of all property transactions. Today it stands at close to 13%. By increasing the stamp duty levy, the Government intended to free up housing stock for first-time buyers, by making additional property transactions so expensive that landlords would think again. However, I’m not sure that this has played out as the Government intended.
When we recently looked into the issue of gifted deposits, our research showed that it was in fact the second stepper who was benefitting from the Bank of Mum and Dad, while first-time buyers were receiving less and less in terms of gifted financial support. When viewed against the drop in BTL figures, this tells me that the market has shifted towards the second stepper – as property prices have risen so high, that there is little people can afford easily without financial support.
Back to the renters:
According to the same article in Homes & Property, monthly rents in London now cost around £1,785. Based on this figure and the general cost of living, how are our aspiring first-time buyers ever going to save for a deposit and get on the housing ladder? My answer is Shared Ownership.
Now I know I created a bit of a debate last week when I suggested that Shared Ownership needed a rebrand – but I still believe that if it was positioned as something other than ‘affordable housing’, those trapped in rental hell could see themselves becoming home owners. Especially as Help to Buy, high LTV products and 100% mortgages are all available on Shared Ownership homes.
I know Shared Ownership isn’t every first-time buyer’s dream, our own data told us that nearly 80% would rather not buy a Shared Ownership home, but when the options you’re left with mean extortionate rents and no guarantees against rent rises or eviction, surely Shared Ownership looks and feels the better option. Let me give you a real example –
Back of a beer mat maths
- Two bedroom flat to rent in Greenwich – average £1,500 per month with a security deposit of 6 weeks rent (£2,250) (Rightmove 02/10/2017)
- Two bedroom flat to buy in Greenwich on Shared Ownership (including 24/7 concierge, cinema rooms, free Wi-Fi and gym/swimming pool (25% share with a 5% deposit.) Total monthly outgoings £1,514 (Moat Homes)
|25% share price||5% deposit||95% mortgage||Rent per month||Monthly mortgage payment|
|Two Bed Flat – Greenwich – Shared Ownership (25%)||£131,250||£6,562*||£124,688||£923.02 (Inc. ground rent and maintenance)||£591**|
*Based on saving over 36 months – £182 per month (or £91 per month if buying with a partner) **based on two year fixed rate at 3%
Furthermore, many commentators believe the BTL situation will get worse when tax increases that have now kicked in, start to bite. That is more likely to be in January 2019 when Landlords complete tax returns for the current tax year!
Which means that yes; I am still in the business of assisting the buying and selling of houses!