People need housing solutions, not scare stories

publication date: Sep 21, 2015
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books

People need housing solutions, not scare stories


With the BBC’s coverage of the shortage of housing this week and having been lucky enough to have the chance to present on some of the good things that are happening, I realise when looking at all the housing stories, especially at a national level, we focus so much on the problems, we forget to write about how to help those struggling to find solutions.

This week I am going to focus on what to do if things are tough – and highlight things people can do to help themselves. A good example of this is the constant comparison between renting and buying. It’s often quoted that renting is cheaper than buying. But the stats used to conclude this, in my view, aren’t a ‘real world’ comparison.

This is because the renting versus buying indices use an ‘average deposit’ that a first time buyer puts down as opposed to compare the costs of renting versus someone buying with a minimum deposit of 5%.

The Halifax index shows that “the average monthly costs associated with buying a three bedroom house in the UK for a first-time buyer was £666 in June 2015; 8% lower than the typical monthly rent paid on the same property type”.

This is based on an average first time buyer having a mortgage of £141,160 and using the average Council of Mortgage Lender loan to value of 83% ie for buying to be cheaper than renting they buyer has to have found a deposit of £28,933.

If the figures were based on a 5% deposit and a property purchase of £170,000, then renting would be on a par with buying and no deposit required, nor would the tenant have to pay for maintenance or buildings insurance, so the rent would be £750 per month and the mortgage payments on a par, making renting much cheaper than buying due to other associated costs.

And in London where tenants and policy makers are constantly being told renting is ‘expensive’ or ‘extortionate’, it’s just plain wrong. What exactly are they comparing this too? When you compare renting to buying its many people’s only option, it is MUCH cheaper and offers flexible living so people can upsize and downsize as needed.

And even in London, despite huge property price rises, rent rises tend to be capped by earnings and that’s shown by the Office of National Statistics whose last index showed that in the 12 months to June 2015:-

  • Private rental prices grew by 2.5% in England, 2.1% in Scotland and 0.8% in Wale
  • Rental prices increased in London by 3.8%, while prices showed an increase of 8% (Land Registry)

Let’s take an example of the average £300,000 property a first time buyer would purchase. Their monthly mortgage payments at 95% loan to value would be £1,363.91 (repayment over 25 years).

In contrast, to renting a property at this price it would cost £1,100 to £1,200.

That’s over £3,000 less a year, just comparing mortgage versus rental payments. On top of this, the tenant doesn’t pay service charges, often at least £100 a month, so save a further £1,200 a year. Then there are the major works charges which can cost thousands of pounds too. Of course, the downside, and it’s a big one, is the tenant doesn’t secure the capital growth.

The real numbers show that it is absolutely wrong to be telling tenants that rents are ‘extortionate’. They aren’t when compared to buying and they rise in line with earnings – in the main - way behind house price increases.

So what are the solutions that renters can those that want to buy can do to help themselves?

Well here are several solutions and I’m focusing in this article on those in London as that is the hardest and quite genuinely one of the toughest places to purchase and rent.

Solution one: shared ownership
A much misunderstood concept, it offers amazing opportunities for those who want to buy and stay where they are long term. It is often more expensive in the short term than renting privately, but it does offer the possibility of capital growth and of course, if you are fed up of having a landlord, then it gives you more security of tenure.

What finances do you need for this E1 shared ownership?
Checkout this shared ownership development for just over £100,000
. It’s in Saffron Court, E1 within walking distance of both Bethnal Green and Whitechapel underground stations.

  • Deposit of just over £10,000
  • Interest rate of 4.15%
  • Monthly repayment £485

Or how about a two bed property in SE8? 
This one is in Yeoman Street, six minutes from London Bridge and near Surrey Quays.

  • Deposit of just over £12,000
  • Interest rate of 4.15%
  • Monthly repayment £592

Want more one to one help?
Then why not come and meet me at the First Time Buyer Show in Islington on 10th October.

For more about shared ownership, read my articles and use our shared ownership checklist to help you get started.

Solution two: Affordable new builds
There are lots more people coming into housing development determined to find a way of building more affordable homes for you. Not everyone is ‘out to get you’!

Here are companies that are doing an amazing job at creating affordable living in London. Currently a London first time buyer on average buys a property for £300,000, that’s a lot for anyone starting on the ladder.

This company, Pocket Living is providing properties in London in the main for less than this, in places like Lewisham, Hackney, Ealing, Brixton and Camden. Find out more here.

Here’s how they price their apartments: “Pocket builds one bedroom apartments for London's city makers. They are compact, and priced at least 20% lower than the open market.”

Read our first time buyer checklists

Solution three: Need help renting instead of buying? What’s new for you?
Lots basically and loads more to come. There are huge numbers of large institutional landlords building brand new properties for long term rent, some of which are at discounted rates too.

The Collective
These guys are setting up the most awesome apartments to suit your lifestyle, all in zones for 1-3 in London. And if you live elsewhere, don’t worry there are plenty of other rental apartments coming forward.

How about living in Kings Cross from £210 per week? Yes it’s just a studio, but the space around this apartment is all you need and they have a whole community to with a concierge service and it includes a cleaner twice a week!

Fizzy Living from Thames Valley Housing Association or Folio London from Notting Hill Housing.

Both of these organisations and lots of others are developing discounted rental properties and ones for private rent from a long term commercial landlord rather than someone that buys to let and may not always know the rules or keep the property up to date.

Visit both of these organisations have properties available in London from just over £1,000 a month or if there are two of you, then you could rent a two bed apartment from £700 per month in London or just over £600 per month in the likes of Epsom.

You can even get a studio apartment in Southwark for £1,120 a month from Peabody.

None of these options help YOUR circumstances?
Then contact us directly and we will do our best to find solutions for you, but please remember, with a chronic housing shortages, in some areas across the country, then compromise will be key.

Read our Tenant Property Checklists


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