UK set for a rented future

UK set for a rented future

Even if 220,000 new homes are built annually, by 2031 more young people will rent than they do now.

Summary:

  • Investors are keen to secure assets in the UK’s private rented sector
  • Over the next 15 years, the proportion of young people living in rented property will increase – even if current plans to build 220,000 new homes annually are met
  • The yields and capital growth associated with UK property will continue to increase as the supply and demand gap becomes more pronounced

The size and significance of the UK’s private rented sector is set to continue its growth in the next 15 years – even if existing home building targets are met.

New research shows that fewer young people, aged between 25 and 34, will live in their own home in 2031 than now. This will still be true even with an additional 220,000 new homes built in England annually between now and then.

The report from the Town and Country Planning Association reveals that currently just over half of the required number of homes are currently being built and to catch up with 2020 projections, the UK needs to build more than 310,000 homes a year over the next five years.

This shortage has been exacerbated by a rising population. Recent research by the Office for National Statistics shows the number of people living in the UK will increase from 64.6 million in mid-2014 to 74.3 million in 2039.

With such low supply of homes and growing demand, property in the UK is becoming a much sought-after investment asset. Average property values have increased by almost double digits over the past 12 months, while, as more households enter the private rented sector, rental yields are currently at record levels.

Even though returns are already high, it is the future potential of the sector that has investors keen to secure assets now. As the supply-demand demand dynamics become more acute, house prices and rental yields are expected to increase further.

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