Population Rent: one in four will rent privately by 2021
- Credit: Getty Images/iStockphoto
Multihousing is set to be worth £70 billion by 2021 according to Knight Frank with investment almost tripling in the next five years
The private rental sector (PRS) is set to account for 24 per cent of the market and include 5.79 million or one in four households by 2021.
In the next five years investment in the PRS will increase from £25 to £70 billion, according to Knight Frank’s latest Multihousing Report.
Surveying 26 major investors, Knight Frank revealed that build to rent has doubled in the last decade, with 65 per cent of investment occurring in London.
15 per cent of residential units under construction in the capital have been built for the PRS, 11 per cent higher than in England and Wales as a whole.
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Although additional stamp duty on buy-to-let investments and cuts to mortgage interest rate reliefs have made the sector slightly less appealing, it is clear that the big players in the market are likely to respond to the uptick in demand for new rental homes with fervour.
James Mannix, head of residential capital markets at Knight Frank commented: “The strength of the UK PRS sector has grown demonstrably in recent years. As consumer demand for affordable, flexible accommodation continues to rise, PRS is firmly establishing itself as a key opportunity for institutional grade investment, due to its long-term potential.”
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According to Knight Frank and YouGov’s tenant survey of over 10,000 people, 37 per cent of respondents said they rented by choice. 63 per cent of respondents said rent within budget was most important, 44 per cent said transport links and commute time were fundamental, location was crucial for 24 per cent and just 8 per cent said the size of the property was most important. Flexibility of living was crucial, with 5 per cent opting for the ease of moving and 8 per cent preferring less responsibility.
Tim Hyatt, head of residential lettings at Knight Frank commented: “The number of people renting out of choice rather than due to affordability of ownership constraints is an interesting indicator of how the PRS market will continue to thrive in terms of tenant demand.”
Long-term renting might be the new normal, with 41 per cent of renters saying they have lived in their property for more than three years, and 68 per cent expecting to remain a renter in the next three years.
The largest group in the PRS is the 25 to 34 age bracket, however it’s not just young people renting in large numbers, with luxury hipster living for the over-50s fast becoming the PRS’ newest target market.
Countrywide recently revealed that the amount spent on rent by the retired has tripled since 2007, with retirees making up £1 in every £14 paid in rent. However, London had the least amount of retired tenants overall in comparison with other areas of the country.
Diana Babacic, PRS Research Consultancy said: “During the next five years, we expect to see slightly faster growth in the number of under-25 households in the PRS, as well as an increase in older households, especially the baby-boomers.
“This growth will be largely on the demand side, but as specifically designed units for these age-groups come to the market in the multihousing sector, we expect supply to start drawing more households to the sector, for example the provision of tailored studio and co-living products for iGens, and retirement rental housing for the baby boomer generation.”