Demand for privately rented accommodation continues to rise across the UK, and according to a new survey 69% of tenants expect to still be renting in three years’ time.
The proportion of UK households expected to be renting privately in 2023 is now 22%, according to Knight Frank’s Multihousing 2019 report, with 35- to 49-year-olds making up the biggest portion of this figure – marginally replacing the 25- to 34-year old “young professional” tenant.
At present, 20.6% of households rent privately, which amounts to an increase by 2023 of 560,000 households. This coincides with a decline in the number of owner-occupiers, according to the survey, although this drop is being moderated by measures such as stamp duty breaks, extremely low mortgage rates and the Help to Buy scheme.
Why do people rent?
More than two thirds (69%) of people who currently rent expect to still be doing so in three years, but this figure rises to 93% for the “baby boomer” generation aged 65 and over. When asked why they were renting, respondents over the age of 50 were most likely say that they did not want the responsibility of owning a home.
For tenants in general, affordability was the key consideration for 61% of respondents choosing a property. The second most important factor was the property’s location, chosen by 23% of tenants, followed by the size of the property for 10% of people.
When choosing a location, the report compared the answers for tenants and homeowners, finding that the number one consideration for both was finding a place within budget. After that, the answers varied. Tenants valued getting to work easily as the second top reason for choosing a particular location, followed by living near family or friends and being close to transport links. Having access to green space came in fifth position.
Meanwhile, homeowners were more likely to want to buy in a location close to family and friends (the second highest consideration after price), followed by being close to transport links and having access to green spaces. Living somewhere with easy access to work was only fifth on the list for homeowners.
The above findings could be key for landlords making investment decisions. Knowing that tenants are likely to prize affordability and proximity to workplace above all else, investors might want to look at areas close to businesses, taking advantage of the trend for city centre living, while keeping rents at a competitive rate to attract the best tenants.
Long-term investment will deliver results
According to Nick Pleydell-Bouverie, head of residential investment agency at Knight Frank, large-scale professional landlords will have invested or committed £75 billion into the UK PRS in the next seven years.
“The case for long-term investment in UK PRS remains extremely compelling, despite Brexit uncertainty, and the growing wall of capital being deployed into the sector is reflective of this.
“Strong demographic fundamentals continue to underpin long-term institutional investment in PRS, and our growing population combined with a shortage of housing delivery continues to create a supply-demand imbalance.”
He goes on to comment that landlords with larger portfolios will be better placed to withstand the added pressure of buy-to-let tax changes, compared to individual, private buy-to-let landlords. He adds: “It is crucial that the UK government resists further legislation and taxation and enables the PRS market to significantly contribute towards the UK’s housing challenge.”