Think UK rental deposits are high?

by Property 118

14:06 PM, 12th March 2020
About 5 months ago

Think UK rental deposits are high?

Make Text Bigger
Think UK rental deposits are high?

The latest research by Ome has compared the average cost of a rental deposit in the UK with 14 other nations who have the highest percentage of renters across the world. Ome looked at the wide variety of rental deposit calculations across 15 nations and what this meant financially for tenants.

In England and Wales, the average tenant currently pays £1,139, although across the UK this is marginally more affordable at £811. The latest changes as a result of the tenant fees ban means that landlords and agents can now only charge five weeks’ rent as a deposit (where the annual rent is less than £50,000). While this might still seem high, there are tenants around the globe with a much larger financial obstacle in front of them.

In Japan where 38.3% of the population rely on renting, tenants are required to pay an eye-watering 10 months rent as a deposit, meaning that the average tenant is required to find an upfront cost of £6,145.

In Denmark, deposits are based on three months’ rent, with a further three months paid upfront, this, therefore, costs the average tenant £4,432 to secure a property.

Like Japan, South Korea also requires tenants to pay 10 months’ rent as a deposit, costing £4,360 on average.

Across the pond, US tenants face paying as much as three and a half months’ rent upfront (£3,547). However, in 24 of the 51 states, there is no statutory limit on security deposits and in these states, landlords and agents can legally charge whatever they see fit.

Switzerland is the fifth most expensive nation in terms of rental deposits and the only other nation to see the average tenancy deposit exceed £3,000 on average. Swiss tenants are required to pay as much as three months’ rent to secure a rental property, coming in at an average cost of £3,542.

Germany (£1,860), Austria (£1,839), Israel (£1,598), Canada (£1,488), Australia (£1,269) and France are also home to some of the highest proportion of renters and an average tenancy deposit higher than that found in the UK.

In fact, just New Zealand (£743) and Turkey (£527) are more affordable and in Sweden, it’s common practice to take no rental deposit at all!

Co-founder of Ome, Matthew Hooker, commented:

“Affordability is an emotive word that implies whether or not someone can have the product or service they want. When you compare renting in the UK with other countries our deposits are actually “more affordable”, however, that doesn’t help our squeezed renters feel any better. The reality is that renting in the UK can be expensive. Saving up your first months’ rent and paying the five weeks’ deposit means moving home can set you back 10 weeks’ worth of rent – excluding moving costs! And that can be all whilst waiting for your previous deposit to be given back to you.

Unfortunately, it’s not as easy as renting without any sort of deposit or security. Look to the Swedes, whilst they do not use deposits they do have central registers of tenants and rent payment histories to protect landlords. Landlords need security to feel comfortable letting someone else live in one of their largest assets. That’s why, at Ome, we’re focusing on how we can provide the landlord with the exact same financial protection as a cash deposit, whilst reducing the upfront costs to tenants when moving home to improve their day-to-day cash flow and rental wellbeing.”

Location Rental deposit period Average rent (per month) Average deposit £ Renters %
Japan 10 months rent £615 £6,145 38.3
Denmark Up to 3 months deposit and 3 months prepaid rent £739 £4,432 39.5
South Korea 10 months rent £436 £4,360 42.3
United States Equivalent to as much as 3 and a half months rent £1,013 £3,547 34.9
Switzerland Equivalent to as much as 3 months rent £1,175 £3,524 57.5
Germany 3 months rent £620 £1,860 48.5
Austria Equivalent to as much as 3 months rent £613 £1,839 44.6
Israel Security deposit taken as first and last month’s rent £799 £1,598 33.5
Canada First and last month’s rent to be paid in advance £744 £1,488 33.7
Australia Security ‘bond’ – usually up to 6 weeks rent £846 £1,269 35
France Up to 2 months rent £573 £1,146 34.9
United Kingdom Up to five weeks rent £684 £811 34.9
New Zealand Defined as a ‘bond’ – up to 4 weeks rent £743 £743 35.2
Turkey Equivalent to as much as 3 months rent £176 £527 40.9
Sweden Deposits are not usually taken £673 £0 35.9
Sources: Rental Deposits Taken: Just Landed Average Rents: Numbeo Percentage of renters: Trading Economics


Comments

Binks

17:25 PM, 12th March 2020
About 5 months ago

Isn’t that interesting. Let’s see how many media outlets pick this up. None? No I guess not, doesn’t fit with the narrative the general public have been fed for years and believe as gospel. Sigh...

The Forever Tenant

9:48 AM, 13th March 2020
About 5 months ago

I have to question this survey again, much like their last one.

I did a check on the first place on the top of the list, Japan. All sources I can see suggest that the deposit is 1-2 months rent (there is often a "key money" non refundable payment of 1-2 months as well, but this is becoming less common).

In other rows, it gives the deposit as including the first months rent. We here in the UK also pay the first months rent in advance so why is that amount not added into the deposit figure for our row.

I am concerned that Ome seems to repeatedly use figures incorrectly and I do question the legitimacy of their data. This may be why the information is not being shouted from the rooftops.

Binks

10:46 AM, 13th March 2020
About 5 months ago

Reply to the comment left by The Forever Tenant at 13/03/2020 - 09:48
I used to live in Switzerland and the deposit information here is correct. I don't quite understand your second point. All deposits in the table are shown as the multiple indicated in the text, with the exception of Denmark, where I suppose they should have used 5 instead of 6 months for better likeness to our system and Israel and Canada, which seem to be in line with the UK in terms of paying roughly two times rent upfront (whether you call it upfront rent or deposit). If anything, they actually overstate what the average deposit is in the UK based on the rent stated, I'm coming up with £789 (try charge £811 on that rent and you are in trouble). What is clear from the data is that 5 weeks of deposit and hence about two months worth of rent in total upfront costs here is very much the bottom of the pile.

The Forever Tenant

11:58 AM, 13th March 2020
About 5 months ago

I can't find theirsource for the average monthly rent figure.

This site - https://homelet.co.uk/homelet-rental-index#Data - Gives the current average at £955. Ome's previous report on this very site, https://www.property118.com/average-deposit-cost-has-only-increased-5-since-2014/#comment-121778 states that the average deposit is now £1,139.

As such, I don't know what to believe.


Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

OR

BECOME A MEMBER

How To Re-Purpose Defunct Commercial Buildings

The Landlords Union

Become a Member, it's FREE

Our mission is to facilitate the sharing of best practice amongst UK landlords, tenants and letting agents

Learn More