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It is difficult to get away from the constant bad news about the UK housing market. Well, bad news if you’re trying to get on the ladder that is. Although we’ve seen some fluctuations, prices have risen pretty consistently. The average cost of a home in the UK is around £310,000 now, according to Zoopla. That rises to £500,000 if you’re house hunting in London. The huge discrepancy between the value of property and the amount we earn has left many younger generations at a bit of a loss. Do you tie yourself to a mortgage you’ll still be paying off at 60? Or do you rent forever and never own an asset or experience real property security – so-called “Generation Rent”.
Being part of “Generation Rent” is now a real possibility for many of us. And there are some pretty resourceful people out there who are looking to take advantage of this. Recent reports in the Telegraph, for example, have drawn attention to the changes under way in the rental sector. We may be used to a buy-to-let landlord who won’t fix the boiler or who refuses to provide anything other than the most basic amenities – but that could soon change. What will replace this is built-to-rent buildings that are almost like retirement villages. Properties that have been purpose built for renters. Locations where you can rent as you would do now but you get so much more for your money. A cleaning service, communal areas, a gym and a concierge. In America, and many parts of Europe where renting forever is the norm, these are already a significant part of the market.
In the UK, traditional attitudes focus on the importance of owning property. Part of this is as a result of the terrible experience many of us have had at the hands of a buy-to-let landlord. The private lettings sector is currently composed mostly of private landlords with only 2% build-to-rent apartments. However, Knight Frank forecasts that this will change over the next five years. The estate agent believes that institutional investors will begin to see the potential advantages of putting their money into these projects. As a result, Knight Frank predicts that by 2020 5% of the rental market will be build-to-rent properties.
There are many advantages to build to rent that go further than just the flexibility and freedom of not being saddled with a huge mortgage. In a society where we are becoming more isolated and alone these projects have the potential for creating friends and relationships. They also wipe out the kinds of huge costs that make home owning such a chore. Central heating breaks down? Up to the landlord to fix it. Can’t be bothered with paying individual bills? It’s all included. Of course the big sacrifice that you make is that of ownership. Whether the UK mindset can shift from the necessity of property ownership to something more casual remains to be seen.
However, there are plenty of indications that this could work for us. We have, after all, completely embraced the shared workspace revolution. Buildings with rentable offices, shared communal areas and bookable meeting rooms are springing up all over big cities. The American co-working brand WeWork that has seen such success in London has already opened up two residential buildings that operate on the same lines in Washington DC and New York. Called WeLive, the residential buildings follow the same ethos as the working spaces. You can rent out your living space fully furnished in a great location and the building has all the amenities of a top of the range home. The benefits of the model are clear for those for whom home ownership is a very distant pipe dream.
While the doom and gloom that surrounds the housing market remains the dominant theme, these new projects let in some light. It may be that future generations are never able to own their own home and that our housing market changes forever. It may be that bearing the cost of a mortgage, fixing your own roof and paying your own bills goes out of fashion. Or we may find that these new rentals offer something more than just a coffee bar and a shared gym. For Generation Rent living together with communal spaces and without gates and gardens keeping us apart might bring back something that critics of UK modern society have long bemoaned: a sense of community and involvement in each other’s lives. Maybe that’s worth more than all the equity in a townhouse.
Alex Hartley is a keen advocate of improving personal finance skills. She's worked at Solution Loans since 2014 and written hundreds of articles about how people can manage their money better. Her interest in personal finance goes way back to...Read about Alex Hartley
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