The rise of the ‘in-between’ renters - David Alexander

Many people, myself included, must have been mildly astonished by the revelation in last weekend’s media that a property located in the East Neuk of Fife, advertised with an “offers over”note-0 price of £1.1 million, eventually secured a sale recorded at £1.7m, in other words a premium of 55 per cent.

Renting allows you to ‘try before you buy’

During almost 40 years of professional involvement in property, I have known times – the financial crisis of 2008 being the most recent example – when a vendor would have been happy with an offer equating to a tenth of that, i.e. 5.5 per cet above the upset price. But such is the contradictory nature of today’s market which for over a year has remained buoyant while hundreds of thousands of private sector jobs have only been kept alive because of “furlough” (in reality a government subsidy) and the national debt has risen above £2 trillion for the first time, even allowing for inflation.

Having said that, the 55 per cent premium referred to above is still the exception rather than the rule so anyone about to place a Corstorphine or Craigleith bungalow on the market should not get too over-excited at the size of prospective offers.

And contrary to the above, it would seem that rather than try and leapfrog competing buyers with excessive offers, growing numbers of people who’ve just sold a house are taking a temporary break from the current hectic sales environment and renting instead.

David Alexander is managing director of DJ Alexander

According to new research by Hamptons, ten per cent of new tenancies this year have involved owner-occupiers who have sold their previous homes. Most of these people intend to return to owner-occupation eventually but have decided to rent for a number of reasons – e.g. a shortage of suitable properties to buy (thanks to the current buoyancy of the market), the wish to get a sale completed before the end of the LBTT/Stamp Duty “holiday” and a desire to “test” a new location before making a commitment to buy.

Within the UK, this trend is highest of all here in Scotland, where more than 16 per cent of tenancies were taken up by people who had moved out of owner-occupation.

The dearth of suitable properties available, and an understandable desire to take advantage of a tax holiday will, of course, be a temporary phenomenon. However the practice of taking a break in rented accommodation between selling one home and going on to buy another will, for some people, continue to make sense even when – hopefully – the market returns to what is considered normal. Too often buyers give insufficient though to the wider “ambience” of a location plus proximity to schools, GP surgeries, rail and bus services and local convenience shopping. A longstanding mantra of mine has always been to think very carefully before renting or buying a property which would involve a trip in the car should you run out of bread or milk.

Renting, even for a relatively-short period, provides the opportunity to size up all of these important – and in some cases essential – issues before making the commitment to buy. Of course, temporary renting means there is always the possibility that house prices will rise further and people will eventually have to pay more than they would have done had they continued as owner-occupiers. However in Scotland tenants are not committed to long leases (they can quit, without penalty, by giving a month’s notice) so everyone has an opportunity to move quickly should they see a house they’d like to buy. And, as a bonus, temporary renting has become much more convenient due to the plethora of companies offering professional storage services.

True, “in-between renting” may incur additional costs but these must be measured against the possibility of taking out a substantial mortgage on what you hope will be a long-term home and concluding – within weeks of moving in – that it’s not right for you.

David Alexander is managing director of DJ Alexander