Tenancy Rates in the UK

Usually, one method adopted, to rein in galloping property prices is by raising the interest rates on mortgages. Hike in interest rates has a dual effect. House owners subsequently increase the rent to meet this hike. Tenants then decide to buy a house of their own when they feel that the rent they pay would be equal to the mortgage instalment rate.

And, those house owners who dislike the payment of regular and heavy instalments get tempted and cash in on the increased house prices rather than get burdened by the hefty interest rates. They sell their property. Large scale sale of property reduces prices, and houses get transferred to the deprived first time buyers.

But, the housing sector scenario in the UK hardly resembles any such situation. House owners are arriving at decisions to buy a second house. ‘Buy to let’ owners are increasing their holdings.

These investment decisions are influenced by many factors. The increasing population of the UK is one reason. This country had 60 million inhabitants in 2005. 2 more millions would be added by 2011. And another 3 million people will be added in the decade after that. By 2021 the population of the UK would be 65 million.

Increasing population figures are reflected in the increase in the number of tenants. 31% of the people stay in rented accommodation in Britain compared to just 11% in Spain. This figure also sharply contrasts with the situation prevalent a few years back. Just 10% of the people had rented homes in the UK a few years back.

There is a 21% increase in the number of tenants. Opinions are rife about the causative factors leading to such drastic increase in the tenant population. Well, no factor is singularly strong enough to bring such an extravagant change.

Many people indicate that the rising immigrant population has swelled the numbers of tenancy holdings, while there are others who believe the rise in single households has impacted the real estate market. There has also been an attitudinal shift in the people. 7 out of 10 people prefer staying in rented accommodations. Purchasing a house indicates settling down and they are not yet ready for such a huge decision. Very few people expect to stay in the same property even after two decades. They feel it is more economical to rent a property with just a month’s rent as advance.

But, no fact can be as significant as the rising property prices in the UK. These rising rates have effectively prevented many from purchasing a house. Unable to afford a house many people are renting accommodations for a shelter. 4 out of 10 people are forced into rented houses for they are unable to accumulate the requisite deposit rates.

The price rise is so phenomenal that about 35% of the people aged in their 30s can never purchase a house by the first quarter of this century. They would be lucky if they are benefactors of a will, otherwise they would have no place on the property ladder.

Though the rising house prices are the major reason for the rising tenancy rates, the changing lifestyles of people are also relevant in this context. Many people are preferring cohabitation to marriage and subsequent settling down in life. Property purchase is normally prioritised by married couples.

These multitudes of changes had their due effect on the rental market. People are not only increasingly taking houses on rent, they are also remaining tenants for longer durations. For, the age of first time house owners has increased. Just 2 out 10 people aged in their 20s are purchasing a house.

Property has shifted from the hands of buyers to property developers. This, in effect, has developed a cyclical reaction. Investors are buying houses in frenzy. The rent they collect from their tenants is equivalent to the mortgage instalments they pay. Increased demand for houses has greatly contributed to increased prices. This has made real estate purchase unaffordable by many. These people subsequently turn tenants and increasing tenancy rates are tempting many new entrants into the rental market.

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