Blog post by Ed Allison-Wright MRICS
The number of private rented households doubled between 2001 and 2014 to 5.4 million, representing 20% of all tenures. This comes as a large number of purchasers are priced out of the market due to the rapid growth of house prices, particularly in the South-East and Brighton & Hove, with the most recent figures for the average house price being £346,829 as of December 2016.
Interestingly, this isn’t the only driver behind the growth of the Private Rented Sector (PRS). According to a recent survey by CBRE, significant parts of the PRS market choose to rent rather than buy for reasons other than just, affordability. To highlight just a handful of these additional motivators, 12% of people renting did not want the commitment of owning, 14% thought it was more practical to share with friends and 12% of renters thought it gave them a wider choice of properties to choose from. People are beginning to value the lack of responsibility for repairs and maintenance, the flexibility of moving at shorter notice (compared to selling), the lower upfront costs and the lack of mortgage and service charge concerns. The more you research, the more you begin to see that the old and traditionally British ideology of aspiring to own your home is not so attractive in today’s world.
Of course, although all segments of the PRS market including families are beginning to see these benefits, the ‘Millennial’ is leading the way. The Millennial is a term used to describe people reaching young adulthood in the 21st Century and perhaps it is because of this group, that the UK is beginning to see a new segment of the PRS market developing in a fast way. This segment is called ‘Build to Rent’ (BTR) and it does what it says on the tin. The key difference being that its purpose built by developers/investors who offer high-quality accommodation with a clearer security of tenure and consistent management, supported by lettings agents and asset managers.
If we rewind a little, the PRS market encompasses anything and everything; including a number of amateur landlords, not professionally versed in real estate and focused on a landlord – tenant style relationship. This is a key difference, because BTR takes a fresh approach; it’s administered by professional investors and developers in real estate and has a similar focus to hotels through embracing a customer-service style of relationship.
BTR looks upon occupiers as residents and not tenants – a big difference in terms of culture. This goes a long way to restoring some of the faith that has been long-lost in the relationship between those renting and those providing rental accommodation, in the UK marketplace.
Providing a level of service so that people choose to rent, has to be the aim for serious investors in the private rented sector.