Fears that renters are being priced out of home ownership

by Darren Devine, Western Mail

A GENERATION of renters is being locked out of home ownership as rising living costs prevent them saving for a deposit, research out today claims.
More than a fifth of people – or 10 million householders across the UK – now say they are spending more on their homes than they can afford.
Spiralling utility bills, council tax and insurance are leaving those in the rental sector with little left to save for the high deposits being demanded by banks and building societies.
Work by the Chartered Institute of Housing (CIH) and property market research group Hometrack shows people who rent alone will be hit with expenses as costly as mortgage repayments on an equivalent property.

With typical deposits for first time buyers at 20%, it can mean finding a lump sum of between £16,000 and £24,000 in Wales.
Recent work by the National Centre for Social Research found Wales could become a “nation of renters” within a generation as more and more people give up on the dream of home ownership
But past president of the National Association of Estate Agents (NAEA) Melfyn Williams said he expected the banks and building societies to relax credit criteria within a year or so.
However, he also questioned whether some renters were willing to make the necessary sacrifices to amass a deposit.
The businessman, a co-director of North West Wales estate a gents Williams & Goodwin, said: “At the end of the day if people are going out four weekends per month, maybe they should only go out two weekends per month to save a little bit.
“Unfortunately it’s going to sound harsh, but there’s a lot of people saying they can’t afford to save and do things, but they’re not sitting down and looking at what they’re spending.”
But Brian Morgan, professor of entrepreneurship at the University of Wales Institute Cardiff (UWIC), believes the banks and building societies will remain cautious and not loosen criteria within 12 months.
He said the supply of good-quality housing in the rental sector was limited, ensuring rents were likely to remain high.
Following the recession, which many blamed on risky lending, banks and building societies have been told to hold more money in reserve to guarantee their stability.
But this leaves less available for lending, creating greater competition for the limited funds available.
Professor Morgan said: “It means that people trying to move from the rental sector into buying are hit because they can’t prove that they’re a good risk.
“It’s a real problem and it’s not going to go away, it seems to me, over the next two or three years.”
The CIH research said single renters who have no other cash injection can take decades to save for a 20% deposit, putting home ownership beyond their reach.
And with gas and electricity bills on the rise again in 2011, disposable income will shrink further.
In city centres rental costs can outstrip mortgages, with people paying a significant premium to live close to work.
Tony Felice, spokesman for the Royal Institution of Chartered Surveyors Wales, has said a two-bed property in north Cardiff which was £525 a year ago will be £625-£650 now – a rise of almost 24%.
If single renters tried to save up the deposit for a typical two-bedroom house over five years, they would have barely have enough to live on, say the CIH.
Sarah Webb, CIH chief executive, said: “We already know that the deposit barrier means more people are becoming part of ‘generation rent’ whether they want to or not. More and more people are struggling to meet their housing costs, let alone save for a deposit.”
The research carried out by YouGov for CIH and Hometrack saw 2,086 adults questioned online between May 25-27.
It’s a problem that won’t go away over two or three years