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Renting - A New Lease Of Life?

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http://www.bbc.co.uk/news/magazine-11002344

The "golden age of home ownership" is over, says a report by a distinguished housing organisation. But could the British ever learn to love renting?

Why I love renting

Louise Northwood and her Co Durham home

Louise Northwood, 31, who runs a dating agency and a recruitment consultancy, leases a seven-bedroom property in County Durham which she shares with her mother and two children.

The rent here is £700 per calendar month - if I took out a mortgage now I'd probably be able to get a two-bedroom house in Durham city for the same monthly repayment.

I like the flexibility - I work from home, and as my businesses have grown I've been able to trade up without the hassle of selling.

Personally, I'd rather invest my time and my money in my businesses - I think the return will be greater.

It's not for everyone but this set-up works very well for me. I'd love to live here for the rest of my life.

It warns that while 100,000 new UK homes are expected to be built in 2010, the number of new households each year for at least the next 11 years is expected to be more than double that.

As a result, the study raises fears for what it calls the "in-betweens" - those typically earning more than £12,000 but less than £25,000, too poor to make it onto the property ladder but too well-off to qualify for social housing.

But could a national consciousness forged in the eras of Right To Buy and Sarah Beeny ever truly be reconciled to paying off a landlord's mortgage rather than one's own?

It may be that millions will have little choice. While owners trapped in negative equity as a result of the crash in prices learn hard lessons about the downs as well as the ups of speculation, an ever-increasing number of young would-be buyers are finding it harder than ever to make their first steps into the market.

According to statistics from the Council of Mortgage Lenders (CML), the average first-time buyer is now putting down a deposit of £35,000.

The estate agency Savills predicts that this high threshold will mean an increase in the percentage of Britons renting privately and a drop in the proportion lucky enough to be owner-occupiers.

By 2020, it forecasts that some 20% of households will be privately rented - up from 15% today and a low of 9% in 1988. By contrast, it predicts that owner-occupied households will make up 62% by the start of the next decade - down from the 2010 figure of 67% and an all-time high of just under 71% in 2003.

UK housing tenure graph

If an era really is coming to an end, it will be a harsh awakening for a country which has come to view owning one's own bricks and mortar almost as an article of faith.

Culturally and emotionally, we like to own our own homes”

Kirstie Allsopp Location, Location, Location presenter

By contrast, Britain's continental neighbours have long approached property tenure very differently. In 2007 just 56% of French and 43% of German households were owner-occupied - thanks in no small part to legal systems which make renting more attractive and secure.

Could the UK now follow their lead? One expert synonymous with the national property obsession - Location, Location, Location presenter Kirstie Allsopp - thinks a rise in the proportion of renters is likely, but is sceptical that their numbers will ever reach continental levels.

She notes that in Germany, tenants have greater security and more freedom to decorate their homes. Moreover, she says, most Britons plan for modest pensions on the understanding that they will have paid off their mortgages before they stop working.

And most of all, she believes, aspiring to be an owner-occupier runs deep in the British psyche.

"Even if renting were more practical here, culturally and emotionally, we like to own our own homes," she says. "I remember how thrilled I was when I first got my own roof over my own head and I think, in general, that people share that.

"However, renting does allow you more in the way of instant gratification and a disposable income in the short term, and I think the culture of sacrifice for home ownership isn't as fashionable as it was."

Of course, renting will always have its advantages, such as fewer hassles, greater flexibility and less exposure to the turbulent property and mortgage markets.

To rent or not to rent

* Pros: More flexible, no risk of negative equity, landlord pays for repairs

* Cons: Usually more expensive, properties of lesser quality, can't decorate, never own your home, paying someone else's mortgage, less security

But very different sentiments are expressed by those who desperately want to get on the housing ladder but cannot even reach the lowest rung.

Supporters of the Right to Buy revolution of the 1980s may proclaim that it opened up the prospect of home ownership to millions, but, according to the National Housing Federation, some 4.5 million people are now stuck on waiting lists for social housing.

With council and local authority homes now stigmatised and apparently reserved for the very worst-off, journalist Penny Anderson, author of the Renter Girl blog - in which she covers housing issues as well as her own experiences as a tenant in Glasgow - says the British will begrudge renting privately until they enjoy similar rights to their counterparts in Germany.

"It's very hard to find anything positive about renting in this country," she says.

"It doesn't feel like living in a home - it's insecure, you can't decorate, you can't have pets. You feel like you're living in someone else's piggy bank."

My grandparents didn't think about owning their own place, they just wanted somewhere nice to live”

Lynsey Hanley Writer

Indeed, for now it appears unlikely that most Britons will voluntarily choose to become long-term renters until the financial and legal status of tenants changes.

A recent survey by the property search website Zoopla suggested that taking out an interest-only mortgage on a home was cheaper than renting in 74% of UK locations - although in areas like Huddersfield, Oldham and Brighton it was more cost-effective to take out a tenancy.

Nonetheless, the country has not always idealised ownership. Writer Lynsey Hanley examined the changing status of social housing in her book Estates: An Intimate History, and points out that the popularity of post-war council homes superseded the property boom of the 1930s which had led to a brief rise in home ownership among better-off working class people.

"This is a weird country," she says. "In some ways we're quite individualistic and in other ways quite socialistic.

"It would take a massive change in people's priorities for renting to become truly popular again - but then again, it's a generational thing. My grandparents didn't think about owning their own place, they just wanted somewhere nice to live."

Perhaps it is simply finding somewhere nice to live which is the real national obsession. Until Britons believe that renting is the best way to achieve that, however, it could be that millions are about to fall short of their aspirations.

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What an interesting graph - is 70% owner-occupier the norm, or is 20% actually the norm and we are in a blip that is soon to be over?

A bit unsure about this though bit on renting:

* Pros: More flexible, no risk of negative equity, landlord pays for repairs

* Cons: Usually more expensive, properties of lesser quality, can't decorate, never own your home, paying someone else's mortgage, less security

"Paying someone else's mortgage" is not really a disadvantage, in the same way I wouldn't regard "Increasing Nestle's profit" as a disadvantage of buying a kit-kat!

It makes it sound like paying your own mortgage is somehow a good thing too: "just look at all that lovely mortgage interest I paid this month! So much better than paying rent". <_<

I still don't intend to rent forever, but certainly not for that reason!

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_48776599_housing464x281.gif

Interesting graph.

You can see the correlation in the mid-80s when the switch from social housing to owning occured, I'd assume this coincides with the right to buy scheme being introduced, although I don't know the exact dates. From 1980 until around 2002 private renting bounces along at around 10% and then suddenly starts to rise, taking most of its share back from owner occupier, I think we all know why this is the case!

There seems to also be a couple of turning points c1938 and c 1955, would anybody know if this are the result of particular events?

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The sudden rise in the 1950s is due to the huge expansion of available mortgages. Post war building was huge and access to credit meant your average middle-class could suddenly buy a house.

Not sure about the late 1930s but I would have thought the recovery from the Depression would have had some effect along with jumps in employment in the build up to WWII.

Edited by deflation

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Interesting graph.

You can see the correlation in the mid-80s when the switch from social housing to owning occured, I'd assume this coincides with the right to buy scheme being introduced, although I don't know the exact dates. From 1980 until around 2002 private renting bounces along at around 10% and then suddenly starts to rise, taking most of its share back from owner occupier, I think we all know why this is the case!

There seems to also be a couple of turning points c1938 and c 1955, would anybody know if this are the result of particular events?

1955 seems a bit early but CGT was abolished for principal residence some time in the late 50s or early 60s.

p-o-p

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The problem with the present renting set-up is the private landlords' propensity to extract value from the system. They try and set rents according to what they think their house is worth and the appropriate return.

We need large mutuals that provide good quality rental property for all pockets - not just social housing.

But surely if they are setting them too high, no-one would rent them. If they are succeeding in obtaining those rents, then surely those rents are the market rate?

People either have to buy a house or rent one. Between the two, house prices and rents will have to find their own equilibrium.

Some external influences (such as mortgage availability or planning restrictions) raise BOTH house prices and rents.

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Some of the comments (and thoughts of the sheeple) make for interesting reading:

The last comment almost sums up my feelings nicely:

"Ironically, the harder and harder I've worked to save up for a decent deposit, the less and less I feel like blowing it all away on a house. House prices are so out of kilter in the UK that I don't feel there is much value for money for what you get when you look at it objectively"

If I buy a house then I no longer have money in the bank I can access when I want without taking on debt and I am left extremely immobile and unable to move if I need too.

Perhaps the writer is right about it being a generational thing. My grandparents rented, my parents, aunts, uncles bought and now most of myself and my friends (25/26 year olds) are happy renting (only 1 friend of mine has bought), so maybe things are changing.

P.s. Doesn't that picture of Krusty REALLY want to make you punch her.

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If you are going to have people renting places out, they need to be able to make a percentage return that is sensible.

When they last imposed "fair rent" controls, then no-one (except dodgy violent b*stards who operated outside the law) would rent places, because it made more sense to put the money in the bank.

Lower house prices would obviously mean lower rents, which would help everyone.

If someone has £200K to invest, they are only going to invest in a house to rent, if they can make at least a couple of percent more than they could by putting it into something "effort free" like a building society or whatever.

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What an interesting graph - is 70% owner-occupier the norm, or is 20% actually the norm and we are in a blip that is soon to be over?

Neither. There isn't a historic norm.

The renting line leaves a nagging question: what is classified as what? Before ASTs there was a lot of "off the radar" renting, because landlords weren't prepared to grant a tenancy so you got a "license" instead. And what about student digs, bedsits, and renting a room in someone's home?

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To rent or not to rent

* Pros: More flexible, no risk of negative equity, landlord pays for repairs

* Cons: Usually more expensive, properties of lesser quality, can't decorate, never own your home, paying someone else's mortgage, less security

Usually more expensive... Actually, my rent is less than the interest I receive on the £400K(aprox) I'd need to draw out of the bank to buy the house I'm renting.

properties of lesser quality... My rented house is of a very high quality.

can't decorate... I hate decorating.

never own your home... Really, I could buy tomorrow, cash

paying someone else's mortgage... I don't think my LL has a mortgage

less security... I have a 1 year rolling contract which I confirm each year three months before renewal, that's secure enough for me.

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Usually more expensive... Actually, my rent is less than the interest I receive on the £400K(aprox) I'd need to draw out of the bank to buy the house I'm renting.

properties of lesser quality... My rented house is of a very high quality.

can't decorate... I hate decorating.

never own your home... Really, I could buy tomorrow, cash

paying someone else's mortgage... I don't think my LL has a mortgage

less security... I have a 1 year rolling contract which I confirm each year three months before renewal, that's secure enough for me.

I'm in a similar position to you, with similar thoughts.

The place I rent is very nice and I could buy it cash. LL has actually offered it to me.

No thanks. I'm paying around 70% of an IO mortgage to rent it and it needs work. He can stump the cash up for new boiler that is due in November and get the leaking guttering sorted.

Fair play if he sells at some point for a profit - I'm sure he will. But not to me. I'm thinking it's game over for a few years on capital appreciation.

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  • 140 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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