By Mike Edwards
This information is taken from Rightmove’s Quarterly Consumer Confidence Survey out today. Trapped renters, tenants who would like, but cannot afford to, buy, make up 55% of the rental sector, with one in four of them over the age of 40, according to the portal’s latest Consumer Rental Forecast. Thus, this group faces the prospect of having to choose between a heavily reduced mortgage term to pay off any mortgage they do eventually take before they become pensioners, or continuing to pay off a mortgage into their 70s and beyond.
In rough terms recent surveys show that over half of those in rented accommodation would like to buy now, but can’t make the sums add up and, as a result, are trapped. The global economic woes that have left first-time buyer numbers at record lows will shatter the goals and aspirations of many as they face the reality of renting for far longer than they originally planned. Indeed those trapped and still renting when over the age of 40 could face the prospect of being an OAP mortgagee, or face difficulty getting a 25-year mortgage term if it takes them beyond lenders’ retirement age criteria. Generally most front line lenders will take age plus mortgage term to a maximum of 75
There is also a growing gap between demand and supply and demand continues to set records. But available stock is down 5% on the last quarter as the supply of new rental properties remains muted and tenants stay in properties for longer. The lack of supply means renters are resigned to paying more, with 53% of them expecting rents to rise in the next 12 months and 39% can see themselves still renting in three years’ time. On an Assured Shorthold Tenancy a properly served Section 13 notice to increase the rent leaves tenants with little option provided the newly sought rent is in line with local market levels for similar properties. The other danger for longer tenants is that it does not matter how much the rent is increased by, only that it reflects current trends. So any tenant that has been enjoying a fairly soft rent might find themselves with a nasty surprise if the Landlord or their agent monitors local rent and increases levels accordingly.
This of course is all good news for investors holding the type of property in demand especially in sought after locations. This combination of high tenant demand and upward rental pressure will be particularly appealing to long-term investors. Many investors say that attractive yields from rental returns, compared to returns on their other investments, are their main reason for investing in property. With the stock market continuing to offer the certainty of a stressful rollercoaster ride and safe cash investments delivering below inflation returns the solidity of bricks and mortar combined with high tenant demand and rising rents has growing investor appeal as a physical asset that could prove to be a better long term hedge against inflation.
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