The UK housing market has experienced vast changes over the last few years. In just a generation, the country’s mindset has shifted, with young people seeing themselves as eternal renters rather than aspiring homeowners. In 2017, a record £50 billion a year was spent on rental accommodation by tenants in the UK. This figure is more than double the 2007 level, which just a decade ago, stood at £22.6 billion. This massive increase in total rental spend shows a huge boom in the UK private rental sector. This seismic shift in the UK property market has caused a range of challenges and opportunities for potential buy to let property investors. But what are the reasons for these changes?
Increased Demand for Rental Property
These record figures show that the demand for rental accommodation is higher than ever. Nearly a fifth of UK households are now renting from a private landlord. This increased demand has led to a more competitive market, with rising rental rates in most UK areas. Private landlords and buy to let property investors are seeing significant gains from the changing market, with high yields and capital appreciation of potential rental properties. There have also been government proposals to increase tenancy agreements to up to 3 years. Rental accommodation is now perceived as a long-term living arrangement for many people.
Who is Generation Rent?
One of the main groups affected by this monumental shift towards renting is millennials. They are often living in city centres, where property prices are highest, and buying where they want to live isn’t an option. With massive student debts and rental bills that are often more than half of their salary, saving for a deposit for a house isn’t an option. These young professionals are looking for high-quality rental accommodation in convenient city centre locations. New developments and regeneration projects are often providing an answer for this.
There has also been an increase in older renters, as its taking so much longer for people to be able to be at a stage where they can buy their own home. Nearly half of 25-34-year-olds live in private rental accommodation, compared to just over a quarter in 2006-07. There has also been an increase in 35-44-year-olds who are renting privately, from 11% to 29%. With an increased number of older people renting, who potentially have more disposable income, high-end properties are proving popular.
The Fall in Home Ownership
The amount of people buying their own home also continues to fall. A 2017 research briefing for the House of Commons showed that at the end of 2016, only 65% of UK householders owned their own home. Its peak level was 71% of households in 2003. There have been many factors that have influenced the decline in home ownership. An ageing population means people are living longer in their homes; therefore, their children are getting any inheritance far later. The financial crash of 2008 saw the total shutdown of 0% deposit mortgages and easy credit. Since then mortgage approvals have continued to be low, despite government efforts like the help to buy scheme. With fewer people buying houses, naturally more are living in private rented accommodation in the UK.
The same research briefing showed that there has also been a fall in social renting over the last twenty years. This could be due to a cut in government spending and increased demand for private rental accommodation. There are also more students than ever, living in both purpose-built student accommodation and private rentals. Student property is another area where landlords have been seeing increasing success. At RW Invest, we have a range of high yield, low-cost student apartments that are another great investment opportunity.
At the other end of the scale, many older people are deciding to sell their homes to release equity for the higher cost of living. With care costs, increasing household bills and diminishing savings, old people are starting to look for rental accommodation. Some older people are also choosing to make the most of their retirement, moving overseas or travelling for extended periods. This means that having a house is often an unnecessary financial bind, so they are joining the growing rental market too.
A Golden Opportunity for Investment
The reasons for these record-breaking rental figures are varied and complex. However, this unique combination of elements means that the demand for rental property has never been higher. For potential investors, buy to let property is a lucrative asset. The increased demand for rental properties has led to both an increase in rental rates and capital appreciation for buy to let property. To take advantage of the unique opportunities presented by the current housing market, browse a range of high-end buy-to-let properties at https://www.rw-invest.com/.