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First-time buyers spend £50,000 on rent before buying
The average first-time buyer making a home purchase in England this year will have spent £52,900 on rent before making their first step onto the property ladder.
According to new research by the Association of Residential Lettings Agents (Arla), this figure is set to rise to a staggering £64,400 for first-time buyers just starting to rent this year.
A big chunk of earnings
The study, compiled by Arla and the Centre for Economics and Business Research (Cebr), suggests that the average person buying their first home in 2016 will have spent 16.4% of their entire lifetime income on rent prior to buying their own home.
In 2015, renters on average spent just over a fifth (22%) of their wages on rent, where Londoners splashed out nearly a third (30%). In general, people living in the East of England benefitted from the most affordable rent payments (19%), as this is offset by high average incomes in the region, according to the research.
The cheapest rents in the UK lie in the North East, where first-time buyers will have spent £31,300 on rental payments before making a home purchase. At the other end of the spectrum, perhaps unsurprisingly, the average spend on rent for people buying their first home in London this year is twice the amount than in the North East, at £68,300.
It appears London and the South East of England drag the national average up dramatically, as they are the only regions whereby the average spend on rent is above the average – with a spend of £55,900 in the South East.
The report found that those leaving home to rent for the first time this year will pay out an average of £64,400 on their rent before they’re able to buy their own home. This is over a fifth (22%) larger than those buying their first home this year!
In London, these prices are much higher, spending an average of £91,500 on their rent before buying their first property – if they started renting this year. That’s over £23,000 more than the first-time buyers settling down in London this year.
Not only this, but it’s suggested that those moving out aged 18 will, on average, spend 13 years in a rental property before they buy their first home.
Struggling to save? How the government could help
Worryingly, the research also suggests that two fifths of current tenants doubt that they’ll ever be able to afford a home. If you’re renting at the moment but you’re finding it difficult to save money for a deposit, you could benefit from one of the government’s Help to Buy schemes.
The new Help to Buy ISA* scheme has already seen a huge take up, with over 250,000 first-time buyers opening an account. Here, the government will top up your savings by an extra 25%, up to a maximum of £12,000. So, if you saved the maximum, you’d be able to benefit from a free £3,000 towards your first home purchase. You’ll only be able to deposit up to £200 per month, however.
Plus, if you’re planning on buying with your other half, you’ll both be able to benefit from the Help to Buy ISA, meaning you can each save up to £12,000 – earning £6,000 extra in total between you. You can find out more about this scheme here.
For a full list of the government’s Help to Buy schemes and how they could work for you, head here.
*It was reported in August 2016 that the government bonus on Help to Buy ISAs cannot be included in the initial deposit on a home, but is paid once the sale has completed. Find out more here.