As the UK population is set to continue to rise, the need for more housing is growing, and landlords are likely to feel the effects in the form of heightened demand for their rental properties.
Using a combination of census data, Office for National Statistics (ONS) research, and the latest English Housing Survey report, Savills has revealed its projection for the UK private rented sector in terms of housing need.
Using the propensity of various age groups to rent, alongside government household projections, Savills believes there could be an additional 800,000-1,000,000 households living in privately rented property by 2031.
It forecasts that between 2021 and 2031, the 25-34-year-old age group will see the biggest growth in tenant numbers. This could see an additional 370,000 living in rental housing in the UK during this period, while it projects an increase of around 229,000 renters aged 35-44 years old.
The majority of landlords have already noted an increase in the level of demand for their properties, particularly in certain areas where the supply of high-quality rentals may be lower. The research from Savills indicates this is set to continue, and this should support pricing and rental yields in the sector.
Using these figures, Savills reveals that around £300bn of investment is needed in the private rented sector in order to fill this rising need, which can come from a range of sources including institutional investors and private landlords combined.
Urban and suburban landlords needed
Savills’ report hones in on the UK’s build to rent sector, which is a fast-growing part of the country’s private rented sector. Essentially, it defines homes that are constructed solely to house tenants, meaning they tend to be brand-new developments in high-need areas.
According to Savills, the greatest level of rental property undersupply at the moment is in the suburbs. Therefore, it estimates that 550,000 new homes are needed in suburban parts of the country, while 360,000 rental properties are needed in urban areas, and 110,000 in rural locations.
Landlords looking for the best rental prospects tend to target busy towns or cities, as tenants increasingly want to live close to amenities and conveniences, including transport links. The ’15-minute neighbourhood’ is another sought-after quality for many, where everything is available within easy reach.
City centre locations continue to be popular, and huge numbers of build to rent developments continue to be built in these locations. However, there has also been a rise in commuter town popularity in some places, such as Stockport near Manchester, as it offers a more affordable option than the city.
Rise in build to rent reveals key trends
Landlords looking to maximise the potential of their rental portfolios may find some of the trends emerging within the build to rent sector can help them tailor their offering to attract more tenants. What people expect and want from their homes has changed over recent years, whether they be homeowners or renters.
Guy Whittaker, Associate, Head of UK Build to Rent Research, says of build to rent: “Aimed at working families and co-renters, the offer is better quality than the wider PRS – properties will be cheaper to run with fewer maintenance costs, given they are newer homes.”
This can be applied across the wider PRS, in the sense that tenants are increasingly drawn to higher quality properties, particularly newer homes. New-builds are therefore becoming a more popular choice for landlords, as they can be marketed towards tenants looking for cheaper to run homes with fewer maintenance costs.
Build to rent tends to attract a greater proportion of young families and young couple who are looking to start a family or settle into a more permanent community. The long-term nature of this can be replicated by traditional buy-to-let landlords too, as a higher quality offering can encourage tenants who want to stay put.
This can be a benefit for landlords who want to reduce void periods, and who prioritise having a good relationship with responsible tenants to reduce the hassle of reletting the property frequently.
