So you want to buy a home? You’re in a shrinking majority.
Of the 17 million renters in the UK, more than two-thirds now have no plans to purchase a property in their lifetime.
A third of Brits are currently renting the home they live in, and official statistics place the UK ahead of only Denmark, Austria and Germany – some of the world’s wealthiest countries – in terms of the proportion of owner-occupied homes across Europe.
Affordability is, of course, a major hurdle.
The average price paid by first-time buyers in 2017 was £207,693, more than 50 per cent higher than five years earlier when the same property cost on average £138,663. That’s an increase of almost £70,000, or £1,150 every month.
Understandably, a fifth of those lifetime renters don’t want the financial commitment that comes with owning a property. Another fifth doesn’t want the cost or hassle of maintaining it, while just under a fifth cite flexibility – not wanting to be tied to one area or preferring the freedom to travel, according to research from Direct Line.
With Scotland homing the highest proportion of renters – almost half the population – compared with just a fifth in the West Midlands, it takes a British renter anywhere in these islands an average of 15 years and two months to get on the property ladder.
But for many, the cons are beginning to rapidly outweigh the pros.
“The UK housing market continues to change and we are seeing a major attitudinal shift when it comes to renting,” suggests Christina Dimitrov, business manager at Direct Line for Business. “While price is a factor, many people are increasingly comfortable with the flexibility afforded by renting a property rather than jumping into home ownership.
“In line with the greater demand for rental properties, the government has introduced tougher controls and regulation.” Recent legislative changes mean landlords have to meet stringent guidelines to ensure the health and wellbeing of their tenants, for example.
Which all sounds fine. We’ll all go down the German route, spend our disposable income on nice clothes, holidays, decent cars and stylish stuff for our kids. We may never again worry about what miserable shoebox we could kill ourselves to afford.
The major problem with all this is the cash, though not in the way you might expect.
The truth behind the numbers
Renting for an entire lifetime will cost you £1 million more than purchasing your own home, according to research by – surprise, surprise – new home builder Strata.
The research, which compares the cost of owning a home in the UK to average monthly rental payments over a 60-year period, proves that purchasing is significantly cheaper over the course of a lifetime.
According to the Land Registry, the average first time buyer’s house costs £212,079, with a 16 per cent deposit. With an estimated £7,900 of purchase fees and other costs such as stamp duty, solicitors bills and moving costs, and assuming buyers rent for an initial nine-year period, they will spend around £432,000.
Add in the bills associated with the typical five moves during an owner’s lifetime and the bill rises to £465,000.
There are problems with these numbers though. It being almost impossible to work out an average increase in mortgage costs for upsizing, downsizing, moving area, even moving country and every variation in between during a lifetime, the figures are replicated for each purchase and both rent and ownership costs are subjected to inflation – at around 2.68 per cent a year.
But that £465,000 even includes the cost of renting for 9 years before you’re able to buy – at the average age of 30.
Meanwhile, renters will spend £909 a month on average on a lifetime home, which when adjusted for inflation, would reach a total of £1.6 million over a 60-year period – assuming, for the sake of number crunching, that renting starts at 21 and ends with the average life expectancy, 81.
The difference is well in excess of £1.1 million.
Of course, figures across the UK vary dramatically. In London, where remarkably would-be buyers spend some of the shortest periods renting before stepping on the housing ladder, the gap is almost £2 million, even with the £87,000 bill just for a lifetime of moving costs as a homeowner.
Even in the North East, at the lowest end of the scale, there’s still a staggering £720,000 difference.
In terms of the proportionate spend, lifetime renters in the North West will suffer the greatest difference, spending in excess of 300 per cent more than their owner-occupier neighbours, who would pay just under £300,000 in total.
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