Yes, I did say ‘rentirement’ and not retirement… what am I talking about? ‘Rentirement’ relates to the 872 (and growing) Rotherham people who are approaching retirement but don’t own their own home. They are currently in their 50s or early to mid-60s and rent their home privately from a buy-to-let landlord.
With ‘retirement’ approaching and the expectation of little more than the state pension of £155.95 per week plus a small private pension which will only equate with a couple of hundred pounds a month, these retirees may only have about £200 per week once they retire at 67.
The difficulty with ‘rentirement’
The problem is that the average rent in Rotherham is £469 a month so most of the retirement ‘income’ will be take up in rent – the remainder will have to be paid for out of their savings or the taxpayer will have to stump up the bill. With life expectancy currently in the mid to late 80s that is going to be quite a big bill… over £98 million in the next 20 years will be paid from the tenant’s savings or the taxpayers coffers to be precise!
You might say it’s not fair for tax payers to pick up the bill and that these mature Rotherham rents should start saving thousands of pounds a year now to be able to afford their rent in retirement.
However, in many circumstances, 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 or didn’t earn enough to qualify for a mortgage. Now, as they approach retirement with the hope of a nice council bungalow, the hope is diminishing thanks to the council house sell off in the 1980s.
For a change, it looks like those living in Rotherham who are aged 30-40 will be better off. Their parents are more likely to be homeowners who will cascade their equity down the line when they pass away.
This 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 are able to invest the money they have inherited from their parents passing away and buy their own home.
How will this impact buy-to-let landlords in Rotherham?
Have you noticed how the new homes builders don’t build bungalows anymore?
In fact some have said the desire for bungalows 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 homes builders there is more money in constructing houses than there is in constructing bungalows. Bungalows are voracious when it comes to the land they need because a bungalow takes up the same amount of square meterage as a two/three storey house yet is only on one level.
Here lies the problem – demand is increasing and will continue to increase whilst the supply of bungalows will remain the same. We all know what happens when demand outstrips supply… the rent price for bungalows will inevitably go up.
‘Rentirement’ is a pressing concern. Landlords, if you have a bungalow in your buy-to-let portfolio it might just be worth hanging onto it. If you don’t, make sure you keep your eyes peeled for any opportunities as these properties could prove to be worthwhile investments.