A new multi-housing report reveals five trends that are set to dominate the private rented sector between now and 2025.
The report, compiled by Knight Frank, reveals the following trends in the PRS:
+ As demand for privately rented homes continues to grow - an additional 560,000 households are expected to be living in the private rented sector by 2023. This takes the total proportion of the housing market to 22%, up from 20.6% today
+ Knight Build-to-rent (BTR) homes are increasing, but starts that more are needed. There are currently 29,416 professionally-managed PRS units completed, and the current supply pipeline of BTR units under construction or in planning is 110,092.
+ Individual buy-to-let landlords are exiting the market – mortgage data shows that the number of new mortgages taken out by landlords has fallen over the last two years
+ Home ownership rate declines further – the proportion of households who are homeowners is declining (although the overall number of homeowners is rising, as the population increases.)
+ Increase in provision of social housing - provision of social/affordable housing will increase over the next five years as a response to looser lending rules for councils, new government funding for social housing and increased activity of Registered Providers in the land market in recent years.
The latest research from Knight Frank suggests that in the region of £75bn of investment will be committed to the professionally-managed PRS by 2025.
Overall, more than 10,000 people across the UK responded to the Tenant Survey, conducted for Knight Frank by YouGov. The report reflects the views of 5,000 people living in the private rented sector across the UK. For the first time, the survey also includes 5,000 homeowners, allowing the study to draw conclusions on the differences between homeowners and renters.
Some of the key findings include:
+ Young professionals (aged 25-34) no longer make up the largest group living in the PRS, having been overtaken by 35 to 49 year olds (but only very slightly). This age group is also expected to show the biggest growth in households in the PRS over the coming years, with difficulty in obtaining a mortgage deposit to buy a home remaining a hurdle
+ Affordability remains the key priority for 61% of tenants when choosing a property. More than one in ten tenants said renting allowed them to live in an area they could not otherwise afford
+ Location is the second biggest priority for tenants(23%) followed by the size of the property (10%)
+ Lack of a mortgage deposit remains key driver for renting, though this ranges from 71% of young families to just 41% of iGens (those aged under 25)
+ On average, 69% of tenants still expect to be renting in three years’ time, rising to 93% for Baby Boomers (aged 65+)
+ Tenant priorities are more focused on ‘internal’ factors – amenity within an apartment – than ‘external’ factors – such as local shops.
Knight Frank spoke with more than 25 of the largest funders and developers of purpose-built PRS and Retirement Housing to gain insight into how the market is set to develop:
+ 38% of respondents said they wanted to engage in providing “cradle to grave” housing, i.e. student housing right through to Housing with Extra Care for older people.
+ In five years’ time, 56% of investment will be outside London (up from current levels of 44%)
+ The average net yield for professionally-managed PRS properties is expected to settle at around 3.9% in 2022
Nick Pleydell-Bouverie, head of residential investment agency, commented: “We are seeing a significant number of individual private buy-to-let landlord 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.
“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.”