1 in 4 Renting by 2021 1st Jul 2017
Almost one in four households in Britain will be renting privately by the end of 2021, with a predicted rise in the Private Rented Sector (PRS) of 24% (Knight Frank), bringing it to 5.79 million households. The Multihousing Report surveyed over 10,000 people living in the PRS across the UK. 68% of renters expect to be living in the PRS in 3 years time.
Young professionals aged 25-34 make up the largest proportion of households in the PRS, perhaps not surprising given how difficult it is to get on the housing ladder these days, however many also enjoy the flexibility of not being tied to a property which they own. A quarter of the number is families with children. Renting families, along with 50- to 64-year-old soloists and couples and retired people over 65, spend more than half their incomes on rent. Overall, 40% of renters pay more than 50% of their incomes on rent.
The most common reason for renting was saving for a deposit to buy a property – 30%, followed by 21% who said renting allowed them to live in an area where they could not afford to buy, and 18% who said renting was more affordable than paying a mortgage. Just 8% said they were renting because they did not want the responsibility of owning a home; 6% need the flexibility because of work; 6% are downsizing; another 6% cannot find an appropriate property to buy; and 5% do not want to be stuck in one location. The key concern for tenants is affordability, location, and then size – in that order.
The research also found that institutional investment in the PRS is set to accelerate over the next 5 years, although for now this is largely concentrated in cities down south, such as London.
Further recent research by Shawbrooks argues that whilst there is a slight cooling in buy to let (likely due to political uncertainties and Brexit), serious landlords will stick it out and make money. The report, which was undertaken for Shawbrook by the Centre for Economics and Business Research sees buy to let remaining a good investment opportunity for the professional landlord investor community. Those who want to grow their lettings portfolio for the long-term could prosper. This report forecasts that the share of dwellings that are privately rented will increase from 21% in 2016 to 28% in 2027, driven by issues of affordability and raising a deposit, plus as previously mentioned, the diminishing appeal of home ownership. As demand for rental properties continues to rise, the research suggests there will be a 21% increase in average rents in the UK by 2027, although yields may dip as house price growth outstrips rental growth.
Already landlords are adapting to tax changes for mortgage interest payments. As these only affect private landlords, those who register their business as a private limited company and commercial landlords will not be affected. Figures from the National Landlords’ Association show landlords planning to take out commercial loans rose from 10% in July 2015 to 19% at the end of 2016.
Certainly, all of the above research suggests that investment in buy to let is the way forward. The Key Place has in depth knowledge of the local markets in which we operate which can help inform your buy to let decisions. We also offer a full buy to let service. We can source high yield properties, help find the best mortgage, complete the acquisition and then manage your buy-to-let investment. Contact us now for further information.