Over 40% of young people believe they will never step on to the first rung of the property ladder, and could become lifetime renters, finds Landbay.
What’s the latest?
Millennials can expect to spend more than £100,000 on rent before they manage to get on to the property ladder.
The typical person living outside of London, who starts renting at the age of 21, will hand over £110,830 to a landlord before they manage to buy their first home when they are 32.
For Millennials living in the capital, that figure more than doubles, with this group expected to spend £273,210 on rent before they buy somewhere, according to peer-to-peer lender Landbay.
But with 41% of young people claiming they do not think they will ever be able to purchase their own home, many will be lifetime renters.
Why is this happening?
A combination of high house prices and the large deposits needed to qualify for the most competitive mortgage rates mean the average age of first-time buyers is increasing.
As a result, young people are likely to spend longer in rental accommodation than previous generations did.
But renting a property is not cheap, with the average tenant paying £1,196 a month outside of the capital and £1,871 in London, and tenants can expect their rent to rise by at least the Bank of England’s inflation target of 2% a year.
Who does it affect?
The group said that while young people have always made up a higher proportion of the rental sector than other age groups, there has been a marked increase in the past decade.
In 2005/2006, 24% of people aged between 25 to 34 lived in the private rented sector, but this figure had soared to 46% by 2015/2016.
Young people renting a home often find themselves trapped in a vicious circle of paying a high rent whilst trying to save for a deposit.
Landbay estimates that Millennials who buy their first home by the time they are 32 will have spent 34% of their post-tax income on rent since they were 21, making it harder for them to get together the money they need to get on to the property ladder.
Sounds interesting. What’s the background?
While young people may be attracted to London by better job prospects, Landbay’s research suggests there are other cities which also have attractive career opportunities but are considerably cheaper in which to live.
Hull is the cheapest place in which to rent a property at an average of £436 a month, and it came 24th in a recent survey by employer review website Glassdoor looking at the top 25 towns in which to work in the UK.
Stoke on Trent, which came fifth in the report, has average rents of £466, while being a tenant in Blackpool and Dundee, which both came in the top 25, costs around £473 and £527 a month respectively.
Top 3 takeaways
- Millennials will spend more than £100,000 on rent before they manage to get on to the property ladder
- The typical person living outside of London will hand over £110,830 to a landlord between the age of 21 and 32
- That figure more than doubles for Millennials living in the capital, expected to spend £273,210 on rent
You might also be interested in...
- Cheaper to buy a home than rent – unless you live in London
- First-time buyers face £15,000 shortfall when buying a home
- Millennials choose adventurous travel over buying a home