• Kevin Murphy

UK: Rental Demand Growing

Demand for UK residential rental property is expected to reach six million by 2025 in a report by agents Hamptons International. Changes in demographics and the housing market itself are the reasons according to the analysis released in Propertywire.

By 2022 it is projected that 20.5% of households will be renting which equates to an increase of 19.4% today with current house prices and wages not allowing for home ownership.

Typically rental properties are managed by individual landlords but this is beginning to change as investor activity has decreased in the rental sector.

The report states:

‘Often homes that their owners have previously lived in find their way onto the rental market. Couples who decide to move in together, relocate for work or simply keep a home as an investment are common reasons.’

‘We tend to see a larger number of these homes move into the rental market when price growth and activity slow in the sales market. In 2017, we estimate that 80,000 home owners who tried to sell their home decided to put those sales on hold and rent their property out instead.’

The Office of National Statistics says that inheritance is how many landlords get their rental property. It is reported that 20,000 homes change ownership simply through inheritance. In the past most were sold by the heirs or used as residences for themselves.

UK Finance, the research group, says that 16% of landlords received their rental property without purchasing or through inheritance.

Recent research from UK Finance shows that 16% of landlords acquired their property without a purchase.

The next concept is the Build to Rent which has become another growth area for the private rental sector. This brings on to the market blocks of flats for the purpose of being rental properties owned by large institutional investors including pension funds.

‘Build to rent only accounts for a small part of the market today, but we estimate there are more than 100,000 units in the pipeline and more to come.’

‘These sources of rental property, which are not dependent on individual landlords purchasing new homes, explain how the sector can expand while landlord purchase numbers are sluggish.’

The analysis finds that many of the properties are insulated as a result of substantial housing wealth with cash owners outnumbering those in need of a mortgage with an increase in numbers over the past 23 years.

‘Indeed, some 65% of investor purchases were made with cash in 2017, that’s £21 billion worth of property and the report says that this volume of cash has largely been built up through high house price growth over the past 25 years.’

‘The mass of cash in the market alongside increasing institutional interest is acting as an insulation to changes in policy. Creating a firm foundation on which the sector can continue to grow, particularly as the demand for rented homes will continue to rise.’

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