According to Hamptons June Lettings Index, 105,000 young adults decided to stay at home, saving £1.3 billion in rent. The average rent on a single room has increased 26%, with 1 beds rising by 30%. Therefore young adults are staying at home longer to save for a deposit to buy or rent a property.
Just like a mortgage company looks at your finances, this is also happening more when you offer on a rental property. Both estate agents and landlords are asking for more financial documentation. They are looking at tenants’ revenue streams.
If your salaries does not pass the reference checks, then you may need to pay 3 or 6 or even 12 months up front to satisfy the affordability criteria. Even then, a nervous landlord may say no. This is also because it is now harder for a landlord to ‘evict’ a tenant.
Pets Lets we recently had a client where we had to provide further financial documentation. We then were asked to pay the 1 week holding deposit by the estate agent, only for the landlord to say they did no like the tenant profile. Basically, the landlord had an issue with the clients, who were relocating to the UK from the US with their cats, as they were not already established in the UK with their work. Whatever we said, we could not change their decision. Normally, when you pay the holding deposit, you have secured the property and it is off market. This particular landlord was very nervous about financial stability.
Calculating rental affordability
This Rental Affordability Calculator from Smart Money Tools is an easy way to see if you would pass the reference checks. The general rule of thumb is your annual income should be 30 times the monthly rent.
Best to know your financial position before you look at properties. Otherwise, this will only become an issue later.
Affordability tips for tenants
- Have all your documentation prepared. If there are others offering on the property, you may lose out. Landlords and estate agents like to agree a deal asap.
- That includes employers references stating position and salary. If you have been with the company a long time, or are relocating to the UK with your existing company, state the number of years. Landlords like employment security. More appealing than someone starting a new role.
- If you have savings, have a recent statement to hand.
- If you are receiving parental support. Be prepared to share the source of the funds. Is it from savings or from a salary.
- A good landlord reference helps to show you are an ‘ideal’ tenant. If you are renting with pets, then state that your dog or cat has not caused any damage.
- A pet cv. Those cute images really do help. We have convinced many a landlord to say yes to pets.
According to this BBC article, average rents in London could hit £2700 per month. We are seeing a slight ‘slow down’ in the London rental market. Rather than having to rush to see a property, you have more time to book in a viewing. You can always tell when estate agents are ‘picking up the phone’ to you rather than you chasing them to book in a viewing.
Preparation, preparation & preparation
When it comes to property, people over the years have referred to the old phrase of location, location, location.
I think, preparation is just as important when it come to buying, selling or renting a UK property. There is far more ‘red tape’ on all fronts. If the ‘paperwork’ is not in order, how can you focus on the location and the property? All you can do is ‘window shop’.
With the London rental market in the middle of a UK cost of living crisis, there are signs that rental prices may have peaked. Any further rises are becoming ‘unrealistic’ in relation to peoples wages.
The next 6 months will give a clearer picture. London landlords may have to be more open-minded about rent levels as well as tenant profiles. With more people leaving the capital and being able to work from home, the pool of tenants will only reduce. Younger generations are turning to the build to rents (BTR’s). Why not. Rents are a bit more, but you are saving on renting an office space and joining a gym. Wifi is also included in many. It is all about the monthly ‘bottom line’.
This article was written by Russell Hunt, Founder of Pets Lets. With over 25 years as a London estate agent and London property search agent covering London and the home counties, as well as a dog owner with a basset/ beagle, setting up the Pets Lets Relocation Service made complete sense. We work with clients from all over the world. Pets are our four-legged children, aka ‘fur-babies’.