Rental prices up 10% and unlikely to fall any time soon

According to Zoopla, the average monthly private rent in the UK is up 9.7% compared to this time last year (January 2023). While some experts predict growth will start to slow over the next few years, others have warned that scarcity of supply will continue to keep prices high.

Speaking to LBC, one London-based estate agent explained:

"Rental growth has been driven by an imbalance between limited supply of new rental properties coming to the market and a growing population of renters.

"We believe that rents are likely to rise further over the next two years as employment remains high and competition for rental properties is sustained.”

He explains that although rising yields are encouraging some landlords to re-enter the market, we likely won’t see a drop in rents until 2025:

“We forecast a 5% increase in rents across the UK and London in 2024, followed by a drop to 3-3.5% in 2025 as the accumulation of new supply begins to soak up demand."

So, the near future might not be looking too bright for private rental tenants trying to save a deposit to buy a property, unless they consider Shared Ownership.

Shared Ownership is a government-backed scheme and is a great option for those who have started saving a deposit but are struggling to reach the amount needed to buy a home on the Open Market.

Here's how it works – once you’ve found the Shared Ownership home you want, you buy a portion known as a ‘share’ (between 25% and 75% of the full market value) rather than the whole thing. You then pay rent on the unbought share, along with service charge.

Buying a property with Shared Ownership offers many benefits:

• A Shared Ownership mortgage requires a much smaller deposit than an Open Market mortgage (from 5% of the share you buy rather than the full market value, subject to affordability)
• The rent you pay on the unbought share is subsidised (usually around 2.75%), and annual increases are regulated
• Monthly mortgage payments on Shared Ownership properties are impacted less by interest rate fluctuations
• Over time you can increase the portion (share) you own, reducing the amount of rent you pay. With this process known as ‘staircasing’, you can go all the way up to 100% ownership, at which point you stop paying  rent!

Let’s look at an example – if you purchased a 25% share of a £500,000 Shared Ownership home (£125,000), you’d need a minimum 5% deposit of £6,250. Your monthly repayments would be approximately £1,534 (for a 30-year mortgage at 5.5% APR and the subsidised rent, excluding service charge). If you purchased the same property on the Open Market, you’d need a minimum 5% deposit of £25,000, and your monthly repayments would be approximately £2,697 (for a 30-year mortgage at 5.5% APR, excluding service charge). In this comparison, the monthly costs when buying with Shared Ownership are over 40% cheaper than if buying on the Open Market.

If you’d like to know more about the Shared Ownership scheme, visit the Government website.

To view our Shared Ownership homes across London and the South East, visit our properties page