For those unable or simply not interested in owning their own home, the single biggest hurdle in securing their ideal rental property can be the upfront cost.
Newly released research has revealed how much we are paying to secure a rental property and how this has changed in the last five years, as well as how this price increase compares to other items throughout our daily lives.
The data shows that on average the current tenant is now paying £1,139, a 5% increase compared to the £1,088 paid in 2014. Renting is thought to be one of life’s largest financial hurdles, with the traditional upfront deposit charged at the start of a tenancy, in particular, posing an obstacle to the nation’s tenants.
However, when looking at the cost of a deposit compared to the inflation of other everyday costs, the figures show that deposits have increased at a lower rate than many other costs of living, suggesting the issues of cash flow surrounding renting stretch further than the deposit itself.
The cost of a basic pay-TV package, such as Sky or Virgin, has increased from an average of £22 to £28 in the last five years, the largest increase at 26%.
While the cost of renting has increased, it’s the cost of buying a home that has seen the second-largest increase in the last five years, up 24% to the current average house price of £231,265.
The sum we spend on our mobile phones has seen the third-largest increase, up 22%, while the price of a Big Mac has also increased more than the average rental deposit (+19%).
Other items that have increased at a greater rate than tenancy deposits in the last five years are car insurance (15.3%), the price of gold (10%), the cost of a pint (10%) and the cost of a cinema ticket (6%).
In fact, the only things to make the list that have increased at a lower rate than a rental deposit are home insurance costs (4%) and petrol (-2%). During this time, the average UK salary has only increased by 12.4%, meaning many day to day items have grown at a larger rate, although again, the rental deposit is not one of these.
“So what?” I hear you ask… With all other costs rising, many of these are now able to be paid in smaller, bitesize monthly payments with most people opting to pay for things like car insurance monthly rather than as a lump-sum, even if it ends up costing more.
There are deposit alternatives where a tenant is able to swap the traditional lump-sum in advance deposit for a more management option whereby there is a MUCH more management payment up front and then subsequent monthly payments of less than £10 per month.
“And as a Landlord, why wold I be interested?” Well with the introduction of the Tenant Fee Act 2019, Rental Deposits were capped at the equivalent of 5 weeks rent and as a result Landlords are now limited in the protection that they have against damage and arrears that would usually be able to be recovered using deposit funds.
The deposit alternative, Nil Deposits, actually provides Landlords with the equivalent of 6 weeks rent in protection and is almost identical to the traditional deposit schemes in how it operates in the event of a dispute at the end of a tenancy.
So not only will you be covered at a higher amount, you are also opening your property to achieve more interest as it will appeal to all tenants, including those that are happy with a lump sum and those that would prefer a monthly payment.
For more information, please do not hesitate to get in touch with me on 0161 442 1118 or connect with me on Linkedin HERE.