It could soon be just as difficult to rent a property as it is to buy if deposits continue to soar, a new report has warned.
According to the research by the Centre for Economic and Business Research for money.co.uk, rental deposits could account for up to 120% of monthly salaries by 2026.
The average rental deposit is estimated to reach £1,111 in the next 10 years, or 70% of the average Brit’s monthly income.
In London, deposits are projected to rise to whopping £2,733, sucking up 120% of one month’s average salary at £2,281.
The deposit traditionally required by landlords across the UK is four weeks’ worth of rent. The CEBR estimates in ten years’ time 68% of deposits requested by landlords will be equivalent to six weeks’ rent.
As a result, tenants could increasingly find the cost of renting just as unaffordable as buying, despite the required financial outlay being significantly lower than getting on the property ladder.
Hannah Maundrell, editor in chief of money.co.uk, warned that tenants were likely to see their rents go up following the forthcoming stamp duty changes as landlords pass on their costs
She said: “The current booming property market means deposits are likely to continue shooting upwards in the future, and we could well see six weeks’ worth of rent extended to eight.
“Tenants are stuck between a rock and a hard place and the situation is only likely to get worse. Many not only face being priced off the property ladder but also the rental ladder too. This could force people to borrow the extra cash they need for a deposit on loans or credit cards, pushing up the cost and creating a perfect storm for a major renting crisis.
“Maybe the bank of mum and dad should prepare itself for another withdrawal? Or, we could see many left with little choice but to live with their parents well into their 40s.
“The government needs to take action because without intervention the spiralling cost of deposits and rent could have a huge economic impact on the UK. Giving renters a lifeline is equally as pressing as helping people buy a house. Taking steps to address this now could be a far easier solution than dealing with the prospect of pricing home hunters off the private rental ladder.”
