The UK private rented sector (PRS) has been on an upward trajectory since the 1990s. The number of people relying on rented accommodation has doubled in this time, resulting in one-fifth of all households being owned by private landlords.
These are the findings from the latest English Housing Survey, published on 2 March in relation to the 2015/16 financial year. Overall, it shows there are now 2.5 million more households renting privately than there were at the turn of the century.
There are no signs of this trend slowing down either. A report by Knight Frank anticipates the sector will continue this growth over the next five years, meaning a quarter of all homes are set to be privately rented by 2021.
For investors, this is promising news and shows demand remains strong, especially in buy-to-let hotspots across the UK. If you can source property in a location with high tenancy demand, you’re assured of high occupancy levels and rental income each month.
The underlying factor behind the surge in rental reliance is a lack of affordability in the property market, itself augmented by a chronic housing shortage. Combine this with an ageing population and large net migration figures and you’re left with many traditional first-timer buyers stuck for options.
In relation to the younger generation, stagnating wages and rising prices has put home ownership out of reach. Renting is their only viable choice, and not just for the short-term. Knight Frank found that 68% of renters expect to be in the same position in three years’ time, predominantly for financial reasons.
The English Housing Survey confirmed these observations. It found younger households are more likely to be renting than owning, not just numerically but proportionally as well. The share of those aged between 25-34 in the PRS has increased from 24% in 2005/06 to 46% now. The same period also witnessed a drop in home ownership by the same age group, falling from 56% to 38%.
Families with dependent children in rented housing has also risen by 6% in this same period. This should encourage prospective landlords as families usually make for consistent, long-term tenants. Also of note is that 787,000 households moved from one privately rented home into another, confirming the notion that many people are unable to break out of the rental cycle.
Of course, these positive figures alone won’t make for a successful buy-to-let investment. Location is still key, especially in relation to the thriving student sector, along with expected tenancy demand.
Tenants are also expecting a higher quality standard of accommodation, something the private sector has lagged behind in. Acquiring furnished, energy-efficient properties in a buy-to-let hotspot can therefore be the key to a successful purchase.
One such hotspot is Liverpool. These are the top five postcodes for property investment in Liverpool.
You can take a look at all of our investment opportunities here.