With UK Interest rates at an all-time low of 0.5%, and the rates of home ownership above the European average, even with record number of repossessions, why are so many people sharing a house with strangers?
Interest rates have been at 0.5% since March 2009, which is good if you have a mortgage, but more of a struggle if you are a saver. This means that it is harder for people to save for a deposit for a property, and then harder to actually get a mortgage after the rules on borrowing were tightened after the Banking Crisis of the late 2000’s.
Living in a House of Multiple Occupancy (HMO), sharing a bathroom and a kitchen is increasingly becoming the norm for a larger amount of people.
House sharing isn’t for everyone, but given the increasing purchase prices of property, and the rental market continuing to rocket, it seems that people in their 30’s, 40’s and even 50’s, will be living with strangers, in the same way that they did when they were at University.
With the rising costs of utility bills, and people coming to the end of a cheap deal on their mortgage, the option to cash in a house, if you can sell it, and cut costs is fast becoming a option for a wide range of people across the country.
Richard Walker, is a 53-year-old, recently divorced, civil servant, who after the breakdown of his marriage, wanted to find his own flat in Central London, but found that getting back on the property ladder was not as straight forward as he first thought it would be.
Richard turned to the internet, and the only cost-effective option of finding a place to live in one of the most expensive places in the UK was to turn to house sharing.
“I felt that I had it all. A great house, new car, foreign holidays and wardrobes full of expensive clothes and shoes. However, a lot of that had to go, once I had worked out just how expensive running a house on a single income is.
“When I started to look for a one bedroom flat, one within 30 minutes commuting time of work, I realised that by the time I had paid the rent on a property, a good chunk of my salary would have gone. Then I had to factor in the utility bills, mobile phone, gym membership, food, and clothes, and I worked out that there wasn’t a huge amount left to try and save for emergencies.” said Richard.
According to Zoopla, an online property website, the lowest price for a flat that would meet Richard’s requirements, would be around £1100 per month, and that is for the rent, before adding all the utility bills.
“I just couldn’t justify the cost of it, considering that my mortgage was less than that for a 4 bedroom detached house.” added Richard.
Research into average flat rental prices shows a huge north-south divide, but also that in the Greater London area, it is within it’s own property bubble.
Average Property Rent Prices Per Calendar Month
October 2015 saw average rental prices within Greater London at £1560 per calendar month compared to the Yorkshire and Humber region at £621. With a difference of £929 a month, the north-south divide only seems to get wider.
With higher rents, landlords would appear to be making large profits from the shortage of affordable housing stock to purchase.
Jayne Tibbett, a landlord of 20 years experience, disagrees with that statement, and has seen other property businesses fail in the last 5 years.
“I’m very lucky that my portfolio is spread across the country, with properties from Newcastle to Manchester, Cardiff to London and the South East.
“My business is profitable, but not in the same way that people might think. Letting agents fees have increased, together with the general upkeep of properties. I have to employ people to maintain the properties, and their rates have gone up, as their overheads have increased.”
In the recent Autumn Statement, the Chancellor of the Exchequer announced a 3% premium on stamp-duty for buy-to-let properties, and this will directly impact on the rents that landlords charge to prospective tenants. The average price of a property in the United Kingdom is £299,000, and stamp duty is payable on purchase. The 3% tariff on buy-to-let homes will see the fee increase from £4,950 to £13,920.
So with mortgages harder to get, and rent prices increasing in most of the country, the numbers of house-sharers is likely to increase.
Looking on one of the major house-sharing websites, Spareroom, it seems that the numbers of people wanting to rent a room is greater than the number of rooms available to rent, which ultimately will cause the prices to increase, due to supply and demand.
Average house-share prices, as with rents, are skewed when including Greater London, where the average room rent is £710 per calendar month, whereas further north, you can rent a room, on average for less then £400 per calendar month in cities in the “Northern Powerhouse”, with Leeds (£351pcm), Manchester (£380pcm), and Hull (£340pcm).
Jim Howard knows the difference moving north can make. Jim is 47 years old, and works as a Regional Sales Director, and has recently relocated to Manchester, after his company moved away from the South East, looking for cheaper office space.
“I was very surprised with the difference in the price of accommodation. I didn’t want to commit to buying a new property, so that I can offer maximum flexibility to the company I work for.
“I would prefer my own place, but at the moment, I need to just cut my cloth, and save, save, save. You never know when a big bill will come in, whether that is for the running of the car, or a medical emergency.” said Jim.
Jim’s new home is a shared house, with five other house mates. A shared kitchen and lounge, a conservatory and upstairs, two bathrooms. The bedroom is a decent size, previously being a downstairs lounge, but it has all the things that you need. A bed, wardrobes, drawers and a desk, but not too cramped, and this is the place Jim will call home for at least the next five months.
“I’d never considered sharing with other people, I like my own space too much, but when working out the pros and cons, I took the plunge.
“There are little shops locally and a supermarket about five minutes away, a pub around the corner, and it’s only 15 minutes drive to work. I can park my car right outside the house, which I struggled with in London, and the commute is a lot less stressful than when I was in the South.
“By the time, I did a couple of miles in London, I can be in my office, with a cup of coffee and wading through my emails.”
At 29, Rebecca Busman, now working for a media company after recently graduating, has had bad experiences of house sharing before while at University, but she thinks she’s developed a thicker skin for it.
“Don’t get me wrong, house sharing isn’t my idea of heaven, it means that I’ve managed to put a little bit each aside each month, and I get to keep more of my salary each month for the things I like.
“I’ve had house shares before, ones that I’ve found in the newsagent window, and my advice to anyone thinking of doing that, don’t!
“The best advice I can give, is to go with a reputable company, and visit as many houses as you can, and if possible, meet the house mates as well, you will get a sense of who you might be living with for the next few months or years. Make a pros and cons list for each one and take your time.”
House sharing is something that is growing year on year, and an industry that is set to flourish as house prices continue to outpace wage increases.