The Long Term Growth of the Private Rental Sector as Demand Spikes by 57%

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The Long Term Growth of the Private Rental Sector
as Demand Spikes by 57
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Landlords, property professionals and investors
have a bright future ahead, according to Property
mark, which has revealed new data showing that
demand for private rental accommodation has risen
significantly by 57 over the last four years.
Rental properties, as an inflation-resistant
asset, have proven a positive component of a
long-term investment strategy, providing capital
appreciation over time alongside increasing
rental yields as more and more tenants turn to
the private sector for quality accommodation.
Further, as some landlords choose to sell,
mainly due to reluctance to adapt to changing
regulatory requirements, those rental properties
that remain available have attracted additional
price premiums where slow sector growth places
higher demands on capacity.
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What Are the Prospects for the UK Property Rental
Market?
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Apprehension is natural, where landlords may have
seen mortgage interest rates increase during the
last few months as a result of rising base rates
and persistent inflation but, over the coming
years, those remaining invested in the sector
look set to reap the rewards. Current price
pressures are expected to decline by the second
part of this year. The National Institute of
Economic and Social Research indicates a rapid
fall in inflation as the year progresses.
Forecasts of short-term dips in property values
are an aspect of course correction and a typical
part of the economic environment, similar to the
fluctuating price landscape following the
pandemic lockdowns but a return to gradual,
steady appreciation looks highly likely.
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Indeed, the current volatility may make selling
as a knee-jerk reaction an unwise decision, where
properties may not achieve their full potential
selling price. In contrast, higher demand could
return a more profitable yield than seen
before. As property professionals operating
across the West Sussex region, we have seen
substantial interest, waiting lists and enquiries
from families, professionals and business owners
looking for premium homes within commuting or
travelling distance of commercial areas and
schools. This level of demand has been
replicated nationwide, and regarding an
investment property as a longer-term investment
may be an excellent opportunity to achieve an
immediate secondary income plus a sizable asset
value.
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Why Is Demand for Private Rental Properties
Growing?
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As weve touched on, the reason the private
rental market is expected to reach 5 million
homes within the next two years is that there
hasnt been enough growth in the sector in terms
of the number of properties available to let, to
match the pace of increasing demand. Social
housing is a complex area, but with very low
availability, issues with quality and housing
standards, and backlogs of applicants, thousands
of tenants now prefer the assurance and
experience of renting from a reputable, private
landlord. The Propertymark survey shows that
prospective tenants registering with agents who
are association members reached an average of 147
per branch, coupled with increasing
yields. Another aspect is that, with
high-interest rates, first-time buyers and
prospective owners may not be able to purchase a
property until rates fall further increasing
demand for rental homes over the next 12 to 24
months.
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What Is the Future of the British Private Rental
Market?
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A study conducted last year by the Social Market
Foundation on behalf of Paragon Bank shared
interesting assessments of how the market will
evolve over the next 12 years, looking at
prospects and projections for private rentals in
2035. The independent report supported the
expectation that rental demand would continue to
rise and modelled estimates that, in the next few
years, as much as half of all UK households would
be privately rented accommodation.
Interestingly, there is a likelihood that the
proportion of more mature renters aged 35 to 54
will grow, whereas a larger number of people will
expect to remain in private accommodation in the
years ahead, often due to the cost of purchasing
a property. Landlords can incorporate these
findings into their plans to decide how best to
manage portfolios and identify new investment
opportunities that fit well with the expectations
and demands of the changing tenant demographic.
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Statistics and Forecasts
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• Some of the key takeaways of the report include
• 81 of tenants renting privately are content with
  their accommodation and relationship.
• Mature tenants are increasing as a proportion of
  renters, with varied priorities such as stability
  and proximity to transport connections and shops.
• The growing appetite for longer tenancy
  agreements and flexible terms that allow tenants
  to modify their homes with prior written
  agreement from the landlord.
• The report also notes that the investments made
  by landlords into the quality of private rental
  accommodation have contributed to higher overall
  standards. Over the last 15 years, rental
  properties have become more energy efficient,
  larger, and typically of newer construction.

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Is Property Still a Viable Long-Term Financial
Investment?
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During any period of flux, changing legislation
or increased cost pressures, albeit temporary, we
tend to see peaks in the number of properties
listed for sale, often a decision made without
having the insights that help property owners
make astute, informed judgements. The rise in
demand for quality homes is undeniable. As rental
prices increase to reflect higher property
running and management costs, many landlords will
achieve more profitable yields, both now and in
the future. Other statistics and analyses by
respected industry experts support the belief
that private rental remains a secure and
advantageous investment. Those who retain
properties, expand their portfolios or take
strategic advantage of the anticipated dip in
property sale averages later this year will
benefit considerably.
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Even though inflation and higher consumer costs
are widely expected to plateau and fall towards
the end of 2023, demand is not on a similar
downward trajectory. Property investors focused
on standards, regulatory compliance and
accommodating the needs of high-quality tenants
will be in a strong position. For more
guidance, predictions and prognoses for the
private property rental market, average rental
yields in your area, or advice on managing your
portfolio during uncertainty, please get in touch
with the Tod Anstee team for looking to let
professional support from the local property
specialists.
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