Is the Private rented sector set to grow?
The Tenure Trends in the UK Housing System study indicated that the Private Rented Sector (PRS) could soon outgrow the social rented sector, as buy-to-let investor numbers grow.
Did you know that if the PRS continues to grow at the same rate it will be larger than the social rented sector by 2013?
The belief that the PRS could expand significantly was reiterated by those who took part in a survey for the study which showed that:
Eight in ten people expect to see a rise in the number of people renting rather than buying
93% of 16 to 19 year olds expect to see a rise in the number of people renting rather than buying
This supports the cultural shift that we’ve seen towards renting which has been impacted by a number of factors including government legislation, investment constraints, the affordability of housing and lifestyle changes, taxation and rental supply levels.
For the first time in 100 years the number of owner-occupier homes in the UK has declined and the PRS has increased significantly. But will this trend continue? We take a quick look at some of the factors that will shape the future of the PRS.
The coalition Government still supports the ideal of home ownership and has no immediate plans to regulate or stimulate the growth of the PRS. The recent cuts to Housing Benefit could cause a downward trend in rental prices, especially in areas with a high level of social housing or tenants who rely on Housing Benefit.
Investment and lending
In order to grow the PRS needs more investment, but at the moment the limitations on the number of available buy-to-let mortgages could stifle the growth of lettings stock. On the other side of the coin lending constraints are forcing many would be first time buyers to turn to the PRS for housing.
Did you know that last year the number of buy-to-let loans dropped by 58% when compared to 2008?
Rental supply levels
The latest ARLA members survey showed that in many areas of the UK there is already a shortage in the number of rental properties on the market which only reiterates the need for stimulation and government support. The population of the UK has increased at a quicker rate than the forecasts made by The Office of National Statistics. Currently over 62 million people in the UK and this figure is expected to rise to over 64 million in just 5 years. This means that demand for affordable housing will not decrease for the foreseeable future.
The affordability of housing and lifestyle changes
For some the shift towards renting rather than buying is a necessity rather than a choice. In many cases potential buyers simply can’t afford to secure a deposit for a new home. But for others the choice to rent is proving to be a more attractive option. The crash in housing prices caused many people to lose confidence in the ideal of home ownership and see renting as a long term housing option that allows them more freedom when compared to home ownership.
The big question is - will the housing market pick up and if it does will the emphasis move away from the PRS?
The housing market is still in a fragile state but the PRS is an extremely important sector which provides much-needed affordable housing to the UK and we believe that it will continue to do so in the near future.
What does this now mean?
The potential market is still expanding which represents a good opportunity
However, tenancy lengths are increasing this means that although more people are renting – they are not moving as frequently.
At the moment more landlords are using letting agents when compared to a decade ago, however to save money an increasing number of landlords are using tenant find services only.
There are also more properties and the longer a landlord has a property the less likely they are to use a letting agent.
The current demand for rented property is high, which is great news, but more rental stock is needed in many areas.
Finally a note for Landlords - Agents - Tenants
The threshold of ASTs will increase from October 1st. This means that compulsory tenancy deposit schemes will be extended to properties with annual rents of up to £100,000
Source: HomeLet (with certain details edited)