New research from estate agent, Hamptons, suggests that 117,500 people who have sold their homes in the past year have chosen to rent before buying their next home.
It’s said that this is because the UK housing market has come under extreme demand during and after the eye of the pandemic which has pushed prices to all time highs. As a result, people are selling their homes to take advantage of surging prices, but are then unable to find a new home they like, are unable to compete with other buyers in their desired area, or are unwilling to pay over the odds for a home when prices could well drop in the coming months.
Hamptons describes this as a ‘stop gap’ for sellers, with most choosing to sign short-term tenancy agreements of 6-months or less.
The more competitive the regional housing market, the more sellers are choosing to spend a period of time renting. In Scotland, Wales, and the North West of England, all among the nation’s busiest housing markets, more sellers than anywhere else have started to rent. In Scotland, 16.4% of sellers are now renting. In Wales, it’s 15.3%, and in the North East it’s 11.8%.
Hamptons Research Chief, Aneisha Beveridge, says:
“With many sellers facing pressure from their buyer to move as they struggle to find their next home, rising numbers of homeowners are breaking their chain and renting instead. While moving into a rented home to beat the end of a stamp duty holiday is not new, it is increasingly being used as a stop-gap by house-hunters faced with a lack of stock to buy.
“Renting before buying has also been driven by house hunters making more long-distance moves. With growing numbers looking to live in areas they know less well, many more are trying before they buy. While moving into a rented home to get to know an area often isn’t people’s preferred option, it’s nearly always more cost-effective than buying the wrong house in the wrong street.
“But while buyers face a lack of stock in the sales market, tenants are suffering from less choice in the rental market too. And this lack of stock is underpinning rental growth, which remains well above normal levels, with few signs it’s likely to significantly slow over the coming months. This lack of stock is also likely to suppress activity, meaning fewer homes could be let in 2021 than in 2020, despite last year’s lockdown.”
HSBC says house prices will not drop any time soon
This new research comes at the same time as HSBC announces that, according to its projections, house prices are not going to fall significantly for at least a decade. The bank says that there is around £250 billion currently being stashed in deposit saving accounts, money that is, sooner or later, going to be spent on the UK housing market.
HSBC also points to the fact that borrowing is now extremely cheap, with numerous high street mortgage lenders offering rates of 1% and under and many of them confirming that these rates will remain on offer well into the Autumn. Some lenders are even saying more sub-1% offers are on their way.
All in all, it’s a frenzied market and, despite demand for high end home dropping slightly in the past month, the fight for mid-market homes is as strong as ever. And those who have sold homes and are now renting to try and wait out the price boom are not even the unlucky ones. That title falls to young would-be buyers who are seeing prices rocket around them and are now being told it could be 2030 before they fall again.