Good news! The PRS remains strong despite landlord challenges
In spite of a challenging and unsettled marketplace, two new reports show the continued strength of the private rental sector as more young people and families choose to rent for a variety of reasons.
The continual rise of the private rental sector (PRS) over the last few decades has been nothing short of remarkable. The advent of buy-to-let and rising home buying costs have created favourable conditions for the private rental market to thrive.
In recent years, there has also been a marked generational shift towards renting, mirroring the housing makeup in other European countries such as Germany and France. Alongside the difficulty of getting a mortgage for many first-time buyers, the rising popularity of renting has largely been put down to people increasingly appreciating the flexibility it offers. Moreover, the market has experienced a well-documented rise in the number of family renters as well as middle-aged and older renters, thanks again to a combination of affordability issues, flexibility benefits and consistently rising standards of private rental housing.
As all landlords will be aware, renting is no longer the preserve of those saving up to get on the housing ladder. Of course, landlords have faced a number of tax and regulatory challenges in recent times. And while 2019 is not expected to be plain sailing for the PRS, two recent reports have highlighted the ongoing growth of the rental market. The figures on show help to demonstrate why demand for your properties is likely to be high and sustained as we move through the year.
Rentals account for almost half of available stock
A study carried out by data consultancy TwentyCi, released in January, shows that private rentals account for around 40% of available housing stock on average across the UK. The research, which analysed portal and advertising platforms in the final quarter of 2018, found that nearly 60% of available stock in London was rental property. In Newcastle and Manchester, meanwhile, the proportion of available properties was split 50/50 between rental homes and those for sale. The lowest proportion of available rental homes was found in Edinburgh with 23%, compared to 77% for sale.
PRS continues to rival owner-occupancy
Hot on the heels of the TwentyCi research, the government published the latest instalment of its English Housing Survey, covering the period for 2017-18. The figures show that the PRS accounts for 4.5 million (19%) households. The sector has doubled in size since 2002 after remaining steady at around 10% of all households in the 1980s and 1990s.
The proportion of rental households has remained at around 19-20% since 2013-14. Private renting continues to represent the largest housing tenure in London at 29% of all households, up from 19% in 2007-08. Meanwhile, outside of the capital the PRS accounts for 18% of households, rising from 10% a decade ago. The official figures also show that some 44% of households aged 25-34 reside in the PRS, up from 28% in 2007-08. Meanwhile, over the same ten-year period the number of households with dependent children in the PRS has increased by 795,000. According to the survey, the average PRS tenancy length is now 4.1 years. Almost half (49%) of private tenants have been renting for less than five years, 25% have been renting for 5-9 years and 26% have been renting for over a decade.
What does this mean for landlords?
The above reports show a stable PRS that has grown significantly over the last ten years. It’s interesting to note that the average tenancy is longer than four years, particularly when considering the government’s ongoing plans to introduce mandatory three-year minimum tenancies. Longer average tenancies point to higher standards of rental accommodation and reflect renting being seen as a lifestyle choice for many tenants. The demand for rental homes remains strong, especially in the capital where private renters outnumber any other type of household. This is good news for landlords who can expect void periods to be kept to a minimum and many tenancies to last for the medium to long-term. Overall, the current size of the PRS demonstrates some much-needed stability at a time when the prospect of Brexit and ongoing changes to rental legislation and regulation continue to cause concern for the nation’s landlords.