The number of households in the Private Rented Sector (PRS) has increased rapidly over the past decade, partly reflecting affordability barriers to home-ownership. Indeed, over the past decade (2006-2017) the PRS market has been one of the fastest growing sub-sectors of the property market, growing by over 100% across the regions and by around 90% in London.
Since 2012-13, private rental has been the second largest housing tenure in England behind owner occupation, and overtaking social housing. One of the major drivers of PRS growth has been the lack of housing availability and supply, particularly for first-time buyers, exacerbated by rising house prices in London, the South-east and other major cities. The bulk of this rental demand has been driven by the 25-34 age-group, the so-called ‘Generation Rent’, with renters in this age group more than doubling since 2003.
Population growth, net migration (increasing number of young adults) and a mobile younger workforce have all contributed to increased demand for homes in the PRS. Growth has also been driven by the combination of rising house prices, stagnant wages and tighter mortgage lending, which have made home ownership increasingly unaffordable, despite historically low interest rates.
This growth looks set to continue in the medium term, with the rental market expected to expand by over 2m by 2030, driven primarily by the ‘Generation Rent’ (20-45 year olds) demographic and it is this sector of the rental market which sees appeal in lifestyle-branded homes. The Government is aiming to encourage private institutional investors into the PRS, which is likely to lead to an increased demand from both well-established residential investors and new entrants into the market including pension and insurance funds.