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Demand Moving from Buying to Renting

15th December 2022 Rooms For Let

With soaring costs for home owners in terms of energy prices, inflation and with added interest rate increases, it’s hardly surprising the UK Property sector is in some turmoil.

With these rising costs we are seeing a shift in demand from buying to renting. Whilst this means there will be further pressure on monthly rent prices, the risk for first time buyers stepping in to the housing market, for many, seems just too high to take that leap. Added to the high costs there is an expectation that house prices will fall, potentially leaving new buyers in a negative equity situation, increasing the risks still further.

There is an expectation that interests rates will continue to rise into 2023, (the bank of England has increased base rates a further 0.5% to 3.5% today, 15/12/2022).

Combat Cost of Living

To combat some of the rising costs and to help ease the cost-of-living crisis, many home owners and indeed renters are renting out their spare room to bring in some much-needed extra income. This is possible under the governments Rent a Room Scheme and has no tax implications up to £7,500.00 per year in rent.

With the shift in demand to rental properties, this adds further pressure to a market currently suffering with very low available stock and pushing up rent prices still further from record highs.

However, given the uncertainty with interest rates and in the housing market, it is little surprise many are waiting to see which way things turn.

Of course, with the possibility of falling house prices this may encourage more landlords to increase their portfolio or step back in to a market which has seen many landlords leave. There are also signs that, although there is expectation of further base rate increases, mortgage rates are beginning to steady with some fixed rates falling slightly. Some future base rate rises are already factored in to mortgage products.

New Landlords entering the market would hopefully see an improved level of available stock and therefore less upward pressure on monthly rent costs.

Renting a Spare Room

As mentioned above, many home owners and renters are looking for alternative ways to fund higher costs, one being to rent out a spare room. This can be beneficial to both the home owner and tenant in a number of ways.

For tenants renting a spare room with a live in landlord or in a house share is usually far cheaper than renting a complete property as, generally, all bills will be included in the rent. Bills would normally include energy, water, council tax and broadband so this can be a significant saving.

Find a Room

The home owner will firstly see an increase in their income, tax free up to £7,500.00 per year. For some, if they are living alone, it can also have a social benefit. That said, renting rooms can also have downsides for a home owner with loss of privacy and potential bad tenants so any pros and cons should be weighed up very carefully.

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