Are we to see a generation of lifestyle renters?
A recent survey by London agent Benham Reeves has revealed that perhaps we are looking at a generation of long term tenants who are choosing to rent rather than buy. More than half of the tenants they surveyed classified themselves as 'lifestyle renters' i.e it was their choice or part of their life plan to rent rather than buy.
A further 24% per cent replied that they chose to rent because it suited their lifestyle or they didn't want a mortgage while nearly a third said they chose to rent because it allowed them to live in an area nicer than the one in which they could afford to buy.
I wanted to see if the same applied here in Cornwall and so as an example I looked at a new build house that a landlord of mine has just bought to rent out. The property is three bedroom and in a desirable area on the outskirts of Truro and has been let to a working professional couple.
The landlord bought the property for £260,000. Working backwards, if the tenants had chosen to buy it firstly they would have needed at least a 10% deposit or £26,000 plus the cost of stamp duty (£3000), moving costs, survey and mortgage arrangement fees plus solicitors fees which I have estimated at a total of £2750, bringing a total upfront costs of £31,750.
Mortgage wise, Skipton Building Society are offering a reasonable first time buyer mortgage currently at 1.76% fixed for 2 years with repayments of £965pcm. This is only fixed for 2 years so if they wanted some security, the best 5 year fixed rate I could find was with HSBC at 2.74% and repayments of £1078pcm.
The rent on the house is £925pcm and they don't have to find almost £32,000 up front to move in . it's not hard to see why we are seeing longer tenancies and a high demand for rental properties. Lloyds Bank has also reported that Truro has one of the highest earnings to price ratio in the South West at 9.11 (this is the average house price vs the average gross local earnings). I cant see a major change in this anytime soon and so the rental market will continue to boom and be a solid investment.