Yes, I said ‘rentirement’, not retirement … rentirement. It relates to the 871 (and growing) Thanet people, who don’t own their own Thanet home but rent their property privately from a buy to let landlord and who are currently in their 50s and early to mid-60s.
The truth is that these Thanet people are prospectively soon to retire with little more than their state pension of £155.95 per week, probably with a small private pension of a couple of hundred pounds a month, meaning the average Thanet retiree can expect to live on about £200 a week once they retire at 67.
The average rent in Thanet is £739 a month, so a lot of the retirement “income” will be taken up in rent. This means the remainder will have to be paid for out their savings or the taxpayer will have to stump up the bill (and with life expectancy currently in the mid to late 80s, that is quite a big bill … a total of £154,480,560 over the next 20 years to be paid from the tenant’s savings or the taxpayers coffers!)
You might say it’s not fair for Thanet tax payers to pick up the bill and that these mature Thanet renters should start saving thousands of pounds a year now to be able to afford their rent in retirement. However, in many cases, the reason these people are privately renting in the first place is that they were never able to find the money for a mortgage deposit on their home in the first place, or didn’t earn enough to qualify for a mortgage. Now as they approach retirement the hope of a nice council bungalow is diminishing because of the council house sell off in the 1980s.
For a change, the Thanet 30 to 40-somethings will be better off, as their parents are more likely to be homeowners and cascade their equity down the line when their parents pass away. For example, that is what is happening in Europe where renting is common, the majority of people rent in their 20s, 30s and 40s, but by the time they hit 50s and 60s (and retirement), they will invest the money they have inherited from their parents passing away and buy their own home.
So, what does this all mean for buy to let landlords in Thanet?
Have you noticed how the new home builders don’t build bungalows anymore? Some would say the ‘bungalow story’ is over. The waning in the number of bungalows being built has more to do with supply than demand.
The fact is that for new home builders there is more money in constructing houses than there is in constructing bungalows. Bungalows are voracious when it comes to land they need because they have a larger footprint for the same amount of square meterage as a two/three storey house due to the fact they are on one level instead of two or three.
That means as demand continues to rise for bungalows, supply will remain the same. We all know what happens when demand outstrips supply … prices (i.e. rents) for bungalows will inevitably go up.