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.”
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Could it be that the government has been lobbied by large scale professional PRS to pass laws to make the market less attractive to the little landlord so they can capitalise on the market? When they have it, will the negatives be reversed to ensure they get a fat profit? Surely not!
A scandal what this government has done to our industry to pave the way for its Tory doning BTR companies.
Surely a serious threat to the BTR merchants is the very serious threat of rent controls.
Shareholders in BTR investment companies rely on increasing rents to increase rent returns plus the chance of capital growth.
Rent controls would have a depressive effect on capital values.
The rent control threat is a very serious one.
It does seem to me that the BTR merchants haven't factored into their business model the possibilities of rent control.
I hope their crystal balls work well!
The threat of a looney Labour becoming the next Govt is not an idle threat and they have already stated that they will introduce rent controls.
The BTR merchants could well be hoisted by their own petards!
BTR merchants are simply not interested in penny packets of properties.
They want city centre blocks etc.
So small LL can avoid these BTR merchants by investing in properties about 15 miles out of city centres.
These will inevitably be family type properties.
Eventually social circumstances will mean those city centre tenants will need to move out of those flats to normal houses.
BTR will not be interested in such rental property.
So I would suggest that LL sell up the city centre flats and leave them to the big boys.
Invest in what will always be needed and that is family type homes which is something BTR merchants will never be interested in.
I would like to see the state become the largest player again in rentals and properties to buy but ensure the deeds do not allow any sold property as a real home to be allowed to become BTL, then again im a zero fan of PRS
Paul - what’s the betting any rent controls will be exempted for the BTR brigade?!
And what on earth is that comment in the article about how BTR are best placed to ‘absorb’ the tax changes?!?! THEY don’t HAVE any tax changes, only further tax incentives! How disgraceful to kick the small guy because he is too much of a threat to the big boy, and how utterly daft is it to claim BTR are absorbing tax changes when its ONLY individual people and their families who have to suffer that!
Yep BTR propaganda again.
BTR exemptions as you suggest I wouldn't bet against you them not happening.
But if a Labour Govt I don't think they would be much enamoured by BTR LL.
They would just clobber the whole of the PRS with rent controls.
It is very much a case of the lesser of two evils.
Either way the little leveraged sole trader LL is screwed.
Which is why I will be selling up.
I am gambling on no appreciable CG for the foreseeable future and will be investing in one resi property taking in lodgers.
Of course I will be earning no more than the RFRA of £7500!!!!!
Whether you believe I might be being a bit economical with the truth is something I couldn't possibly comment on!!
But I do know that lodgers will provide a rather nice tax free income to supplement my pension.
I will be a regular 'guest' at another property so lodgers won't impact on my domestic circumstances too much!!
Silly old Govt are going to lose a load of income because of S24 and they won't even know what they don't know!!
I know that my hopefully 5 bed resi property will be perfect for lodgers.
Funnily enough there will only ever be 4 occupiers at my hoped for 5 bed property.
There may be a 5th occupant who will be 'guest. and therefore not an occupier and therefore no HMO licence required for my hoped for 5 bed residential PPR house!!!
I think the days of investing for CG are gone.
Tax free lodger income is now far more appealing!!
Just have to hope that my area they don't introduce additional licensing cos then my 3 lodgers will find they have become 2 households as I will insist on 2 of them becoming intimately involved.
Can't see the council checking to which beds have been slept in!!??
Paul. Be careful! I argued that I couldn't pry to confirm if 4 tenants were actually 2 couples but was warned I (not they) risked criminal prosecution if they weren't able to prove to a court that they were couples. They would only be prosecuted if they committed perjury, not for duping me into thinking they were couples.
Yep but no way will three unrelated tenants have to prove that 2 of them are in a relationship.
As far as the LL is concerned they are.
Very hard for a council to disprove otherwise.
Then of course people break up and get back together again.
Domestic tiffs and all that.
This is why Additional Licensing is easily beaten.
I would rather pay the £2k HMO licence and pocket the extra £600 per month that I can now get due to a shortage of HMO properties. I would also report anyone renting to 3 or more adults without an HMO licence and believe most local landlords would also do so to protect their exclusivity and livelihoods.
Good job im not in government as id be banning HMO's and capping the rent
I think we are safe there David not much chance of you or Labour getting into government anytime soon mate
When yo say Banning HMOs
Do you mean only those subject to Mandatory HMO Licensing?
Rent capping obviously wouldn't work as LL are rentiers seeking profit.
They won't bother if their income possibilities are restricted.
If you did ban 5 occupier or more HMOs where would they live?
I understand your sentiments but perhaps not fully thought through.
Personally I believe probably like you that at least the 2 million properties lost to RTB need to be restored as a bare minimum.
Govt could easily go onto the open market and buy back the 'family silver'
Obviously BAN all RTB.
Personally I resent my taxes being used to fund tenants to buy property cheaply.
I have no objection in principle to RTB PROVIDING that the properties are sold at FULL MARKET VALUE.
That would take off the shine somewhat of RTB!
But there is no doubt that a massive increase in Social housing is required.
The profit motive is not appropriate as LL will never price their offers at rents Govt wants to pay.
It would be best to reinvest in mass social housing.
Have an effective 100 year Govt mortgage for such social housing.
The PRS is not an appropriate form of tenure for the many dysfunctional in society.
It would be desirous if the PRS reduced to 7% of the housing market.
Govt needs to get out there buying properties on the open market.
I'm sure they'd get lots of LL wishing to sell to them.
I have 4 ready to sell to them at the right price!
Remember a live-in LL with a 4 bed house and 3 lodgers would be banned under your suggestion.
Perhaps only HMOs with 5 or more occupiers would be your target.
HM0 should never been brought in, the Prescott Act, to divide Society and if you contribute nothing to exchequer everything is free as reward. my elderly wife now required to pay TV licence just because she is a good tax payer but if milking the system everything is fine & free.
So Knight Frank thinks getting the Deposit is the biggest problem for potential buyers, really that's only the start of their troubles, by the time they have the Mortgage paid for they'll know how insignificant the deposit was.
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