We talk so much about house prices, we tend to place relatively little importance on the rented sector. However, with demand outstripping supply, landlords are being put in the driving seat, enabling them to put up rents for private tenants.
According to the Royal Institution of Chartered Surveyors' (Rics) the average rent in the UK is now £705 a month (up 0.6% in last month). In London it is over £1,009 a month. (7.1% annual increase)
This takes a high % of income, but also there is no sense of investment. If you are paying £1,000 a month towards a mortgage it does at least contribute to paying off capital on your mortgage. If you can take out a mortgage and pay it off by the time you retire, it is a form of pension. A homeowner who has paid off his mortgage can live rent free during retirement. Someone who has been renting throughout their working life, will still have to continue to pay rent (which can continue to increase at above inflation rate) during retirement.
This means those who are renting will need to save proportionately more for their pension in retirement.
A Nation of renters.
The continued lack of affordability in the UK housing market is having pronounced changes in the UK housing market. In 1997, 30% of people under 30 privately rented. in 2011, this ratio has increased to 50%. It is simply much more difficult for young people to get on the property ladder.
Because demand is outstripping supply, renters have to be careful of rogue landlords who are in a position to charge extortionate prices.
A new government-backed kitemark scheme, SAFEagent aims to help improve standards in the renting sector, giving tenants greater protection in disputes. This is a good idea, but, it doesn't deal with the fundamental problem in the UK, which is a relative lack of supply. The number of households in England is projected to rise by 5.8 million from 2008 to 2033, an increase of 232,000 per year on average reaching 27.5 million in 2033. (Communities.gov.uk)
The cost of renting is another factor reducing the living standards of the young generation.
Housing Builds in the UK