There is going to be a huge change in Britain’s housing market but it will be the nation’s poorest people who will suffer the most.
Britain has a housing shortage but demand is high, thanks to cheap credit — interest rates are at 0.25% — fuelling appetite for buying a home.
That means house prices have soared over the last couple of decades, despite the 2008 credit crisis slowing that growth in some areas.
But, according to new data from property agents Savills, rents will start shooting up in 2017 while house prices stagnate. Savill said fewer people will buy houses, push more people into the rental market.
In fact, Savills says that rent is going to rise considerably faster than property prices over the next five years.
Over a five year period, rent will rise by 19%, while property prices will rise by 13%. In 2017, Savills estimates flat house price growth but a 2.5% rise in rental prices. In 2018, rent is going to rise by another 4% while house prices rise by 2%.
In London, rental prices are set to rise by 24.5%, while house prices will only rise 10.9% over a five year period.
This will hurt Britain’s poorest the most, especially those in the capital. If you cannot afford to buy your own home, you rent.
Property prices have continually risen for over a decade, bar the two-year drop due to the credit crisis of 2007/2008:
Even though servicing debt is cheap at the moment, with the Bank of England’s base interest rate at a record low of 0.25%, properties are still wildly unaffordable.
This is because people are not earning enough money to keep up with rising house prices to pay for a deposit. In turn, people who cannot afford to buy a house, rely on the rental market.
But if wages are still not increasing but rent is going to soar, it could spell a crisis for a bulk of Britons.