The UK’s professionally managed private rented sector will have received a total of £75 billion worth of investment by 2025, as increasing demand sees growth continue, according to new analysis.
Indeed, by 2023, it is forecast that an additional 560,000 households will be renting, which would mean that the private rented sector accounts for 22% of the overall housing stock, up from the current level of 20.6%, according to the multi-housing survey report from real estate firm Knight Frank.
It also shows that the renting demographic is changing, as property prices continue to mount. Those aged between 35 and 49 are most likely to be living in privately rented property, and this trend is likely to continue, as many in this age category struggle to obtain a mortgage deposit which would enable them to buy.
The report also suggests individual landlords are decreasing in numbers as the build to rent sector grows. As a result, demand for build to rent is likely to increase. Currently there are some 29,416 professionally managed units completed with 110,092 under construction or in planning.
The market is currently experiencing an exodus of individual buy to let landlords, with the report providing evidence to show that there has been a mortgage uptake by landlords has fallen over the last two years. Additionally, the overall level of home ownership is rising due to the continued population growth, but proportionately, home ownership rates are falling.
The report also foresees increased activity in the social/affordable housing sector, thanks to government initiatives, relaxed lending rules for councils, and increased activity of registered providers in the land market in recent years.
The survey by YouGov for Knight Frank also found that for 61% of tenants, cost is the most important thing to consider when choosing a property, while 10% said that they are able to live in an area they could not otherwise afford by renting.
Location is the second biggest priority for tenants at 23%, followed by the size of the property for 10%, while the survey also shows that tenant priorities are more focused on internal amenities than external ones such as local shops.
Meanwhile, the lack of a deposit is also a key reason why many people rent, though the extent to which this is a factor varies depending on age and circumstance.
‘We are seeing a significant number of individual private buy to let landlords exiting the market as the Government’s buy to let tax changes start to bite. Large scale professional PRS landlords are well placed to absorb this, as well as satisfying some of the structural shortfall in our housing supply,’ said Nick Pleydell-Bouverie, head of residential investment agency at Knight Frank.
‘A principal constraint on the delivery of housing is the estimated rate of sales for developers. The institutional PRS market can significantly accelerate this through near immediate absorption. It is crucial that the UK Government resists further legislation and taxation and enables the PRS market to significantly contribute towards the UK housing challenge,’ he added.
According to Tim Hyatt, head of residential lettings at Knight Frank landlords could be squeezed further by more change. ‘Once again, affordability has emerged as a key reason for people choosing to rent in order to live in an area where they would not be able to buy,’ he said.
‘However, average rents in Britain rose 1% in the 12 months to December as more landlords leave the sector and levels of stock decline. The tenant fee ban, which comes in into effect in June this year, may also result in some landlords increasing rents to offset any extra costs,’ he added.