The dynamic of the private rental market has been changing in recent years.
There's been a decline in private landlords, yet almost simultaneously the Build To Rent (BTR) market has grown exponentially. During the past five years it has grown by 362 per cent and experts predict that by 2030, it will make up 25 per cent of the private rental market. An impressive increase in market share, considering it has only really become established during the teenies.
The thriving BTR market is down to investors, providers and developers taking advantage of opportunities in student accommodation, city and town centres and the rising demand from families for quality rental properties in suburban areas.
BTR providers, of course, must meet legislation too as a ‘landlord’ but backed by investors and being a business with resources, means these challenges are easier to overcome than they are for a solo, private landlord. And this is one of the main reasons private landlords are exiting the market.
In the last three years alone, 200,000 landlords have left, with many stating tightening legislation and tax issues as the main overriding reasons. According to an article in Your Money around a third of landlords plan to review their portfolios this year, with Zoopla stating that most of them plan to sell properties.
With this change in dynamic in mind, has it already filtered down to renters’ expectations?
Recently, we carried out our own research to find out more about the needs of renters, including what their preferred route to renting is. According to our findings, 41 per cent of tenants still see private landlords via an agency as the preferred route. This is compared with 25 per cent for private individuals direct and 21 per cent for companies who build and rent their properties.
It’s not surprising, as traditionally renting from private landlords via an agency has been a common route.
From students to young professionals, to people who rent to suit their lifestyle, an estate agent would normally be the first port of call to find a property to rent, often via an online portal like Rightmove.
But as the number of landlords decreases and the number of BTR providers continue to rise, you’d expect renters' preferred route to shift.
Already our research shows that around a fifth of renters in the UK now prefer a company to build, manage and rent their home to them. This stat is actually ahead of the current BTR market share in terms of properties, indicating its success.
One of the reasons the BTR market has been so successful is because there has been a clear drive from providers, investors, and developers to build quality rental homes that create communities. Typically, all involved in a project will work towards one shared vision, right from the initial plans through to the management of the community. This harmony is why many BTR developments are designed to attract families who want a quality home to rent not just for the short-term.
At Wise Living our strategy and priority has been to build developments in underserved suburban areas of smaller cities and large towns like Wolverhampton, Boston, Birkenhead and Mansfield. This is where demand is strong.
We know from our research and from speaking with residents and prospective tenants in the areas we serve that their expectations for their next home are no different to that of a family who is buying. In a lot of cases, they want to establish roots and create a long-term home. BTR gives them the opportunity to do this.
They expect the same quality, space, and access to their desired amenities for the money they are paying.
BTR is providing that option to renters and with the effect of the pandemic, more people want a flexible lifestyle to match flexible working. So renting is a great option, and they shouldn’t have to compromise on quality just because they are paying rent rather than a mortgage.
As the level of investment from private landlords continues to decrease, more investors and developers are turning to the BTR market to take advantage of that strong demand from renters for quality homes. As many experts predict, we expect to see BTR to go from strength to strength in the next five years as more renters realise the benefits of choosing a home built and managed by one provider.
*Anne Malone is Head of Lettings at BTR provider Wise Living.
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