The UK property market is evolving.
A tenure shift is changing the face of the UK property market and ending the buy-to-let era.
In the UK, homeownership was once a common goal. Levels peaked in 2003 when rates hit 73%, but since then a new trend has emerged in the UK property market that looks set to overtake homeownership in the next decade.
During the same period, the private rented sector (PRS) has exploded from 2.3 million to 5.4 million households. It’s a trend that is gaining momentum – an additional 1.8 million households will rent by 2025, with the number privately renting overtaking mortgaged households for the first time.
Renting is now a long-term option and a conscious lifestyle choice. Short-term, stop-gap accommodation will no longer do.
Generation Y: the future of the rental market
The increasing popularity of the PRS has been most evident in those aged 20 to 39-years-old. This is Generation Y. A generation of aspirational renters. It is estimated that almost 60% of Generation Y will be privately renting by 2025, and the number of 25 to 34-year-olds renting privately doubled in the decade between 2004 to 2014.
Generation Y is a renting generation and their preference is changing the UK’s property market.
For Generation Y, success is no longer defined by owning a property. They don’t want to be tied down by a long-term mortgage, valuing the freedom and flexibility that renting can provide. Happy to move for work, Generation Y hold an average of nine jobs in their lifetime, changing roles every five years.
Renting also allows Generation Y to immerse themselves in dense, diverse cities – a valuable level of immediacy that they wouldn’t experience or likely afford if they bought their own home. A city centre location allows Generation Y to be close to key work, social and transport hubs.
Experiences, rather than material goods, are what Generation Y aspire to. They value practical amenities that make their lives easier and want ceaseless access to technology, connecting them to the world and those around them. They value socialising with friends and sharing a sense of community with those around them.
Birth of build-to-rent
The traditional buy-to-let model doesn’t give Generation Y the lifestyle they want. Build-to-rent, a sector that is estimated to be worth £50 billion in less than four years, is purpose-built, fully-managed accommodation designed with Generation Y in mind. Designed specifically for a rental market that’s growing year-on-year.
What doesn’t work for the tenant, doesn’t work for the investor. Buy-to-let can no longer satisfy the needs of a generation who choose to rent, nor can it provide the returns investors want.
A product in demand from an underserved market, build-to-rent represents the next major growth curve in the UK, and is set to receive incredible demand and high yields. Build-to-rent will attract demand unlike even that seen by buy-to-rent as no other rental accommodation in the UK can offer so much to Generation Y.