Why rental demand is set to continue

June 28, 2017

With such economic turmoil – not to mention Brexit – on the horizon, landlords could rightly be concerned about the sustainability of rental demand across the U.K.

However, at Northwood, we are confident that rental demand will continue, despite these issues.

The first thing to remember is that we are a small island and many people want to live here!

The U.K. has strict planning controls which, over the years, have been partly responsible for successive Governments failing to build enough houses to keep up with our growing and ageing population.

There are three main tenures of housing in the UK – owner occupiers, social housing, and the private rented sector.

However, the social housing sector has been shrinking dramatically over recent years, meaning more tenants need to be housed by private landlords.

Bearing in mind that just 6,800 social rent homes were completed in England in 2015-16, down from 39,560 in 2010-11 & lowest on record, it stands to reason that demand for PRS properties will increase.

Indeed, the shortage of social housing is so chronic that it is is forcing councils to spend more than £2m a day on temporary accommodation for homeless families, according to a local government group earlier this year.

The Conservatives also recently rowed back on plans to build hundreds of thousands of “starter homes” for first-time buyers.  The pledge was quietly dropped prior to the Election.

In a new report, the Smith Institute argues more powers and resources must be devolved to the city-regions to avoid serious shortages of affordable homes.

Analysis of the devo deals in the six city-regions electing metro mayors in May shows the housing crisis is likely to get worse, especially for people on low incomes.

The report says without extra funding the city-regions will see housing supply fall further behind household growth.

Within a decade, the report estimates that Greater Manchester will be 55,400 homes short; the West Midlands 63,000; Liverpool City Region 16,600 and Cambridgeshire and Peterborough 10,800.

Elsewhere, stack-able ‘Lego’ homes are being rushed out in an attempt to deal with the UK’s housing crisis.

The small shipping container-style flats are fully furnished with all the mod cons including dishwashers and showers.

Designed to “provide accommodation for those with an urgent housing need” Chelmsford City Council, in Essex, is hoping to build them after it demolishing old garages.

The plan comes just three months after a national report by the ResPublica think-tank revealed 1.2 million people are languishing on housing waiting lists in England.

The Government’s answer to the lack of housing is to promote the concept of “Build to Rent”.  This is where developers and institutional investors create new housing stock to rent out.

A new study from the British Property Federation shows there are already 40,000 PRS homes in the planning pipeline but this is a fraction of the homes needed to satisfy the ever-growing demand.  It could take 10 to 15 years for BTR to really gain traction in the U.K. housing market and, even then, it is likely to be blocks of flats concentrated in city centres.  Most families want to live in a house in the suburbs in a good school catchment area, and BTR may not provide enough of this type of stock.

According to figures released earlier this month, the population of the UK has increased by more than half a million – the biggest rise for 70 years.

There were 65,648,000 people in the UK in June 2016, according to the Office for National Statistics (ONS).

The ONS said that was a rise of 538,000 on the figure in 2015, equivalent to a city the size of Bradford.

The private rented sector (PRS) is predicted to grow by up to 40 per cent over the next 10 years, meaning landlords can be assured of continuing demand.  This will not be consistent across the U.K., so due diligence is always required.  There may be an over-supply of flats in an area, for instance.

Your local Northwood office would be happy to sit down with you and explain demand in their area. They are experts in the type of properties, tenants, and yields on their patch, and can guide you towards a suitable investment property.

You could also consider purchasing via our Investors List, which has a selection of tenanted properties for sale, some with Guaranteed Rent already in place.

This is a very low-risk way to start out, as you have income guaranteed from day one of ownership and Northwood will already have an established relationship with both the property and the tenants.

If you have any questions for us, please do use the on-line chat facility on our website.

Northwood is one of the largest and most recognised estate agents in the U.K. and the leading supplier of Guaranteed Rent to give landlords complete peace of mind.

Find us on Twitter @northwoodUK or visit our YouTube Channel.

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