What does the modern tenant look like compared to previous generations? What do they now want from their rental property? Here’s what investors need to know…
Certain qualities help assure occupation of a rental property.
A popular location, close to key transport links, spacious rooms. Certain qualities and features get a property rented; qualities that can help keep tenant demand high and grow investor returns. Yet regardless of whether your asset has these must-haves, you may be buying property that today’s tenant doesn’t really want to live in.
The people that rent in Britain today have changed – and the accommodation products available to them need to catch up. Quickly.
Generation X was yesterday’s tenant. Born between 1965 and 1980, these were the people living in your investments in the 1990s and 2000s. They were different from their Traditionalist and Baby-Boomer parents. More independent, more entrepreneurial, more pragmatic. But Generation X was the first demographic to be financially worse off than their parents and, while the majority of their values weren’t aligned, they still craved the security and stability enjoyed by their elders.
But these are no longer the people looking to live in your property. Generation X has grown up and moved on, replaced by a new group of highly-tech savvy, sociable and collaborative individuals. Today tenant belongs to Generation Y. Aged 22 to 35, these people, sometimes referred to as ‘millennials’, are the founders of the social media movement. Their lives are heavily reliant on technology, helping them to remain closely connected to their circle of friends, families and colleagues.
While their Generation X parents craved independence, Generation Y is more comfortable working in teams. And arguably one of the key differentiators between the two groups is their work/life balance perspective. Jamie Gutfreund, Chief Strategy Officer of research organisation The Intelligence Group, asserted in an interview with Forbes in 2014 that while “Generation X lives to work, Generation Y works to live”.
If these are now the people living in the private rented sector (PRS), do the properties currently available to rent match up to their lifestyles, values and expectations?
It was telling that Chancellor George Osborne chose last November’s Autumn Statement to announce stamp duty increases for buy-to-let investors from April. Not only did that announcement come just a few months after the scrapping of buy-to-let mortgage tax reliefs, but the reforms come at a time when the need for rental property investment has never been more pressing. 7.2 million households will be renting in the UK’s private rented sector by 2025, while rental rates currently rise as supply cannot keep apace of sustained levels of demand for rental accommodation.
It was perhaps an acceptance by the government. An admission that buy-to-let is broken. No longer the rental solution that Britain wants. No longer the product that can meet the needs of today’s tenant.
So how have the people living in the PRS changed in recent years? What aspects of Generation Y’s lives, be it professionally, domestically or from a socio-economic perspective, have shifted the goalposts when it comes to residential real estate investment?
In this series we will explore how new priorities, attitudes and life-goals mean tenants want more than just a roof above their heads. They want a home – their home.