U.K. vs. U.S. Rental Market Comparison for 2018

U.K. vs. U.S. Rental Market Comparison for 2018

According to a recent study by Numbeo, the cost of living is now 5.82% lower in the UK compared to the US.

In addition, rent prices in the UK are now 25.24% lower than in the US. However, the average monthly salary (after tax) in the US is comparatively higher at +23.86%.

But what lies beneath the surface of these statistics? How is the US rental market doing compared to the UK and what can we take from that data to inform better decisions in 2019 and beyond?

Long-term forecast good, with a chance of rain?

What lies ahead for investors, property managers, and renters is unknown. However, the data for both the US and UK rental markets point toward a coincidentally similar prospect: brighter prospects in the long-term with a rough patch due to the long-awaited after effects of the financial bubble.

With the effects of the economic downturn or Great Recession still leaving Millennials reeling, and many unable to qualify for mortgages, there has been a steady increase in demand for newer rental properties. However, the fact that this generation is known not having a good credit has made this situation ever worse. As many are unaware of the 4 C’s of Credit and what kind of role they play in a mortgages.

And as time goes on that demand for rental property is only set to increase with the instability of the global economy a major factor for Generation Z as they begin to enter the market over the next several years.

That’s great news for the rental market. However, according to Peak Propsperity in a recent report, much of the world’s market may be entering stage 2 of bubble territory, with housing prices in many of the most desirable locations such as San Francisco, Los Angeles, and London far above the danger point.

This may negatively affect both the US and UK rental market because of what happens as a result. Over the next several years, prices are likely to stagnate before finally entering stage three of the long and winding effect of the downturn where housing prices are expected to drop far below average. At this point, there may be a large upswing in the housing market and a contrasting dip in the rental market.

Evidence in the UK real estate market points to this as well with a reduction in buy-to-let financing over the past 4 years. In 2015, landlords purchased 120,000 houses using buy-to-let finance. However, the Council of Mortgage Lenders estimates this will fall to 80,000 in 2018 with rising taxes and tougher lending criteria being the primary factors responsible for shifting the market in favor of homebuyers.

Prospects for the future

With political turmoil and the after-effects of an economic downturn still reaching out through both regions, the future is uncertain for both the UK and US rental market.

However, while data points to a potential trend towards homeownership in the near future, the financial instability the current and upcoming generation is experiencing may well have created a more permanent preference towards the benefits of renting in both countries.

Author: sponsoredcontent

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