David Hannah, Group Chairman of Cornerstone Group, explains what’s needed for UK renters to get onto the property ladder as research by The Adam Smith Institute finds that for a majority, the first 125 days worked in 2024 will go towards paying their landlords’ bills.

This year’s designated Cost of Rent Day fell on May 5th, indicating the point at which renters earned enough to cover their annual rent before taxes. However, for Londoners, this day arrives on June 16th, over a month after the national average. These findings highlight the significant financial strain experienced by renters, particularly impacting young professionals who are increasingly finding it difficult to afford housing in urban areas such as London. This latest data will cause concern for ‘Generation Stuck’ – those currently unable to buy a home and leave the rental market – with data from Cornerstone Tax revealing that a staggering 42 per cent of renters fear that they will be stuck renting for the rest of their lives.

The relentless surge in interest rates by the Bank of England last year severely compromised the affordability of mortgages and affected buyers’ spending capacity.

Whilst clear affordability issues remain in the housing market, speculation of an interest rate cut later in the year could mean that there is a glimmer of hope on the horizon for those currently stuck in the perpetual cycle of renting. Our research highlights the dire need for change in the rental market, which has been marred by rising prices and increased competition. Notably, 17 per cent of tenants report losing out on their desired rental properties due to bidding wars within the last two years. The situation is also desperate for those who are lucky enough to secure a property, with a staggering 19% of Brits saying they have had to change rental properties more than five times in five years because of landlords and not through any fault of their own.

The escalating cost of renting has been a significant driver of change in the rental market, with the average cost of rent increasing by 8.3 per cent over 2023; a figure buttressed by soaring interest rates and landlords passing on their escalating expenses to tenants. As a result, 15% of buy-to-let landlords have decided to exit the sector, as revealed by or own research in response to mounting costs as a primary reason for selling their rental properties. Furthermore, the survey uncovers that 18% of potential buy-to-let landlords have been discouraged from entering the market due to increased regulations and rules. This growing reluctance of buy-to-let landlords to enter the market will only serve to exacerbate the supply and demand issues which are currently causing upward pressure on prices and bidding wars due to the lack of stock.

The relentless surge in interest rates by the Bank of England last year severely compromised the affordability of mortgages and affected buyers’ spending capacity. Yet, amid this challenging landscape, the latest report from Halifax may provide those stuck in the rental market with a glimmer of hope. Speculated interest rate cuts and the first recorded drop in house prices in six months, may suggest that affordability issues could subside towards the end of the year and early 2025. So, while the road ahead may seem uncertain, it’s important to remember that even in the face of a challenging market, the property market can adapt and rebound, offering opportunities for those who remain vigilant and strategic.