UK set to be a nation of renters

UK set to be a nation of renters

More Britons are expected to be rent their property rather than own in it by 2025, driving demand and, consequently, returns for investors.

Summary:

  • By 2025, it’s expected that more people will be renting their property than owning it with a mortgage
  • More than half of Britain’s 20-39 year olds will be renting 10 years from now
  • Changing attitudes towards home ownership continues to increase demand for quality rental accommodation in the private-rented sector, driving investor returns

Is the UK’s private rented sector (PRS) at the start of an upward cycle?

It’s estimated that more people in Britain will be renting their property than owning it by 2025, new analysis from PricewaterhouseCoopers predicts. This marks a significant change in attitudes towards home ownership in Britain, historically a nation of property owners.

The research suggests that the total UK owner occupation rate will fall from a peak of almost 70% in 2008 to around 60% by 2025. Comparatively, the number of households in the PRS has more than doubled since 2001, with an additional 1.8 million households expected to enter the sector in the next 10 years; this would mean that one in four UK households will be in the PRS in 2025.

Growth will be most pronounced among 20-39 year olds, as the data forecasts that more than half will be renting in 2025.

“A generation of private renters have emerged and this will increasingly be the norm for the 20 to 39 age group,” says Richard Snook, Senior Economist at PricewaterhouseCoopers.

“We project that the proportion of owner occupiers, with or without a mortgage, will decline from its peak of around 70% in the mid-2000s to only around 60% in 2025. The long rise in the UK owner occupation rate in the post-war years seems to have gone into reverse.”

Just 36% of 25-34 year olds in England currently own their property compared to 59% 10 years ago, while research published in July by NatWest found that 48% of 22-30 year olds aren’t currently looking to purchase property.

Of course, rising property prices prevent many from getting onto the property market. But an increasingly mobile labour workforce means that many workers simply don’t want to purchase a home. For example, 75% of workers are prepared to move cities for work – how achievable would this be if they’re tied down to a mortgage?

This demand, and relatively low levels of new housing stock, continues to drive rental rates and returns for UK property investors.

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