Tenure changes over the past decade show a thriving private rental sector and rising returns on investment properties.
- 5 million properties changed tenure from owner to tenant in the last decade
- Since 2005, 700,000 new homes have become part of the private rental sector
- 25% of all properties in the UK to be tenanted over the next five years
The UK private rented sector has experienced remarkable growth over the past ten years.
A massive shift towards investment has driven tenure change in 2 million homes, with over 75% of those moving from owner occupied to tenant residencies.
The extra homes that are now occupied by a tenant rather than a home owner are equivalent to the number of households in the north-east of England, the research from property group Countrywide plc found.
Since 2005, over 700,000 newly built homes have entered the private rented sector. Any remaining homes that changed tenure were from social housing or residential conversions.
Johnny Morris, Director of Research at Countrywide, explained: “The sector has been growing since 2005 but the number of home owners has fallen in each of the last 10 years.
“Rents grew by 4.8% over the year, supported by the imbalance between growing tenant demand and constrained supply of homes to rent,” he added.
The steepest average rent for newly rented properties was in Central London at £2,479, up 1.1% year on year and up 0.6% month on month, followed by Greater London at £1,300, a year on year rise of 5.8% and month on month increase of 0.6%.
However, the high asking prices associated with property in the capital mean, for many, it no longer makes the best investment. Investors often struggle to find tenants capable of paying rents that result in yields of over 3%. Cities such as Manchester currently offer more attainable and attractive yields of around 6%.
The high demand for rental properties is due to continue, with around 25% of all property within the UK to be tenanted over the next five years. This is in part due to the proportion of young people living in rented accommodation increasing.