HomeReal EstateRising prices and rents forcing low earners away

Rising prices and rents forcing low earners away

Over the last few months, low-income earners have certainly suffered the ups and downs of the real estate market. Not only are property prices soaring high in the UK, but as a result, rental prices are reaching their upper limits too. With high rentals, high property prices and high mortgage interest rates, it is becoming even more difficult for low-income earners to find affordable housing. 

So, whether you are looking to buy a house in the city centre or you’re looking for properties to rent in Bicester, it might be a good idea to grab a good deal – at the rate the prices are rising, a good deal might not last too long in this property market!

According to the Office for National Statistics, rents in London were equivalent to 30 per cent of an individual’s average income for at least three-quarters of the total households in the capital. In most areas in central London, tenants were paying a whopping 38 per cent of their monthly income as rent. As per the Office for National Statistics, rent is considered affordable only if it is under 30 per cent of the total income – in this case, only one-quarter of the capital was paying ‘affordable’ rent.

In a recent study by the HM Revenue and Customs department, it was discovered that property transactions soared by a whopping 67 per cent in just one month, from August 2021 to September 2021. When compared to 2020, the property transactions have risen by 68.4 per cent just in the month of September itself.

Data shows that 166,000 homes have been bought and sold in September 2021; the end of the stamp duty holiday in September 2021 could be one reason that many buyers were rushing to close a deal in this month itself. Nonetheless, these figures show the tremendous increase in buyer demand which has certainly led to a tremendous increase in the average price of property in the UK. Speaking of which, let’s take a closer look at the various reasons for rising property prices and rising rents that are forcing low earners away.

Lack of low deposit mortgages

In the pre-covid era, low deposit mortgages were very common; however, after Covid-19 it became almost impossible to mind a mortgage with a 5 per cent deposit. This is one reason that low-income earners were unable to even step foot into the property market in the UK. In 2021, the UK government did start a low deposit mortgage guarantee scheme under which first time buyers and investors could get a mortgage by paying just 5 per cent as a deposit. While this was certainly beneficial, the simultaneous rise in property prices did not help low-income earners.

Renting has become cheaper than buying

For the first time in 7 years, renting a home is now cheaper than buying a home in the UK. This mainly has to do with the fact that the demand for property is soaring in the UK. Some of the most important factors that caused this tremendous rise in price are the change in buyer preference, the impact of the stamp duty holiday as well as the after-effects of Covid-19.

In Great London, on average it is £251 cheaper to rent a home as opposed to buying one. In South East England it is £54 cheaper whereas in the South West it is £108 cheaper to rent a home instead of buying one. In the East Midlands and West Midlands, it is £98 and £35 cheaper, respectively, to rent a home when compared to buying a home.

The demand for space

Due to the Covid-19 pandemic, the UK underwent multiple lockdowns during which people were forced to stay indoors. People were working from home, cooking at home and staying in their homes without being able to go out for a walk or to socialise. This played a major role in the demand for space among homeowners, first-time buyers and tenants. Since people were tired of being cooped up indoors, they were looking to upgrade their lifestyles by moving into bigger and better homes. 

Most buyers, tenants and homeowners actually started looking at potential properties in the suburbs and outskirts as these properties were bigger, more affordable and often came with outdoor spaces such as gardens, terraces and balconies. In fact, estate agents in the UK say that homes with gardens were actually the most sought after properties during the pandemic, followed by homes with spare bedrooms and garages that could be used as work from home offices. Thanks to this newfound need for space, there was a sudden increase in demand while the supply remained relatively constant.

Multiple factors such as the demand for space, the lack of low deposit mortgages, the impact of stamp duty holiday and of course the overall impact of Covid-19 that led to the sudden spike in property prices, which eventually influenced the rental prices too. At the end of the day, it is the low-income earners who suffered the most.



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