What does the future hold for the private rented sector?

Fri 19 Jun 2015

Girl moving home

Almost a quarter (24 per cent) of households will be part of the private rented sector (PRS) by the end of the current parliament in 2020.

The latest Rent Check report, produced by BDRC Continental and Allsop LLP, has outlined what is believed to lie in store for the property market over the next five years.

It includes the addition of more than 1.3 million new households to the UK’s property stock, of which one million will need to be provided by the PRS.

This comes on the back of a 13.9 per cent surge in the proportion of houses within the PRS over the last two years. Rents appear to be increasing too, with a 10.07 per cent upward trend recorded in the south-east over the same period.

Indeed, it is in London and the south-east that the greatest increases are likely to be seen in terms of the proportion of homes within the PRS between now and 2020, as rising tenant demand drives the addition of new rented homes to the market.

Steep increases in house prices have actually led to a slight decline in rental yields, but the prospect of further capital appreciation means landlords are generally extremely keen to invest in property. Some 14 per cent of those surveyed by the Rent Check said they had expanded their portfolios in the last three months and 26 per cent admitted they plan to do so in the coming six months.

Across the country as a whole, expansion of the PRS is described as “inevitable” by the report. What’s more, the PRS is also predicted to become more important than ever by the time the country goes to the polls again in 2020.

The Conservatives have outlined their commitment to home ownership and schemes to increase this are in place.

But in some areas, rents and capital values will rise quicker than people are able to save, meaning owning a property will remain out of the reach of a “large and growing section of society”.

With tenant demand likely to remain high, rents on the rise and the PRS forecast to grow, now is an excellent time to purchase an investment property or to expand an existing portfolio.

For more information on local market conditions and industry insight and advice, please contact your local Leaders branch.