The shift from homebuyer to renter continues in the UK
Property investors have always played a big part in the UK residential market. The role is set to get bigger. As the UK population grows, more homes will be needed. The government knows this and is diverting money and resource to boost new homebuilding. PwC forecasts that there will be 7.2 million households renting in the UK by 2025.
It has long been the assumption that many of those who rent do so as a stepping stone to buying their own home. While this may still be the case, a recent analysis of the English Housing Survey shows that the number of households that believe they will always rent is rising rapidly. This begs the question, should property developers refocus their sales efforts on buy-to-let investors?
1.75 million long-term renters and rising
Of the approximately 5.4 million households that rent in the UK today, 1.75 million now believe they will rent for the rest of their lives. That’s up by 50% since 2010.
This is the conclusion of analysis conducted by the Labour Party. It examined the English Housing Survey, and found that there are almost 600,000 more households that don’t expect to buy in the future than there were just eight years ago. Clearly, government policies to increase affordability and boost first-time buyer numbers is not working as hoped.
At this rate of growth, not only will the number of renters exceed the number of homeowners by 2030, but the number of permanent renters will exceed the number of temporary renters, too.
The owner-occupancy rate is falling
Not surprisingly, the owner-occupancy rate is falling, as it has been since 2003. A number of factors have been blamed for this – including the low numbers of new homes built and the rise in property prices. Even the fall in house prices prompted by the Global Financial Crisis failed to halt the shift from housebuyer to a home renter.
Today, the proportion of homeowners has fallen to 63%, from 71% in 2003.
As the population grows, renting will become the norm
Younger people are less likely to buy today than a decade ago. The fall in homeownership has been most marked in the under-45s. There are now one million fewer people in this age group who own a home than there were in 2010.
Affordability is an issue for this demographic, though so, too, is a lifestyle. Earlier this year, the Institute for Fiscal Studies found that young adults on middle incomes are now less than half as likely to own a home than they were 20 years ago. House price growth has outstripped wage growth to such an extent that homeownership is no longer affordable for many.
In addition, other surveys and studies have found that many younger people choose to rent for lifestyle reasons. They rent with friends, near where they work, and in places where leisure activities are on the doorstep.
Investors could be the major buying force in the UK property market
With homebuyer numbers reducing and renter numbers increasing, clearly, there is a structural shift taking place in the UK residential market. As renting becomes a long-term choice for increasing numbers of households, the attraction of investing in buy-to-let for the long-term increases, especially in the low-interest rate environment.
The UK’s growing population, the inability to build enough homes to meet supply, and the disparity between house price growth and wage growth, are all factors that underpin investment in UK residential.
What type of property do investors want to buy?
Essentially, property investors want to buy homes that are appealing to long-term tenants. These needs are aligned with those of homebuyers – if you are going to live in a property for a long time, you want it to be the right property.
An analysis made by the NHBC and Savills in May this year provided insight as to what it is that people want from a home: whether that home is in a high-density urban location, medium-density residential, or suburban homes within 3km or urban areas. It found that the main factors considered are:
- Minimum maintenance
- Off-street parking
- New home warranty
- Size and design of living space
- Quality of the neighbourhood
- Energy efficiency
(Read our article “What homes should developers sell in a bouncing property market?” for more.)
This is the type of property that property investors are keen to buy. To connect your development with waiting investors, ready to buy today, all you need to do is contact Castlereach. Then let us do the rest.
Call us today on 0207 923 5680.
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