A Region of Renters?
It is an intuitive conclusion that the north east is moving from a home owning model to a region where long term rental is more prevalent. The reasons for this trend are economic and social. Many young professionals are encumbered with student loans and the charity Shelter estimates it takes an average of 14 years to save for a deposit. Additional factors include a desire for young people to enjoy their youth with holidays and the sort of lifestyle that may not be possible while servicing a mortgage. Young people sharing a larger property can enjoy the benefits of an extensive garden and amenities not available in a starter home.
No challenge in the UK would be complete without the intervention of the EU and the property buying challenge is no exception. The EU has legislated to prevent brokers and banks lending without an eye watering amount of due diligence. Borrowing money will get harder for say, a self employed electrician with only 2 years accounts even if he is earning £50,000 a year.
On a recent trip to Italy I was struck by the continental model where renting for life is far more prevalent than here in the UK. One of the determining factors is that tenants in Italy have more rights and thus more security. In Italy a landlord and tenant will typically agree a two or four year rolling contract with the landlord required to give six months notice at the end of the term if they decide to sell. The result is a long term tenancy providing security for the tenant and a stable financial return for the landlord. In the UK a landlord can reclaim their property in two months on a rolling contract which is hardly a model for long term tenant security.
Now, before I hear howls of outrage from landlords who foresee more red tape and a return to the bad old days of sitting tenants, let me say that the opposite should be true. The Association of Residential Lettings Agencies (ARLA) is campaigning vigorously for lettings agency regulation, greater transparency for the tenant and less red tape. If adopted, these policies would ensure security of tenure for tenants and fewer voids for landlords. A winner all round when you consider that the landlord will have recourse to law in the event of a breach of contract.
Another key factor in moving to a stable rental model is ensuring a supply of high quality rental accommodation and our region has embraced this challenge. Hardly a week goes by without our project management team developing a Schedule of Works to transform a distressed property into a home tenants can be proud of while landlords can benefit from a higher yield.
Security, quality and sensible regulation are the keys to making the rental model work for tenants, landlords and agents. Working together with honesty and transparency will ensure that an Englishman’s home is still his castle but it is not really important who owns it.