As the United Kingdom’s population continues its upward trajectory, the demand for housing is reaching unprecedented levels, spelling potential boon for landlords. With the housing market dynamics shifting, a recent report by Savills, drawing on census data, Office for National Statistics (ONS) research, and the English Housing Survey, outlines the anticipated surge in demand for rental properties in the coming decade.
Savills predicts a substantial increase of 800,000 to 1,000,000 households residing in privately rented properties by 2031. Analysing age demographics and government household projections, the real estate firm forecasts the most significant growth in tenant numbers among the 25-34 age group, expecting an additional 370,000 renters in the UK during the period from 2021 to 2031. The 35-44 age group is also projected to contribute to this surge with an estimated increase of around 229,000 renters.
Landlords across the nation are already experiencing heightened demand for their properties, especially in areas where the supply of quality rentals is limited. Savills’ research indicates a continuation of this trend, suggesting it will support pricing and rental yields in the sector.
To meet this rising demand, Savills estimates a staggering £300 billion investment is required in the private rented sector by 2031. This financial influx can potentially come from diverse sources, including institutional investors and private landlords pooling their resources.
Focus on Build-to-Rent Sector
Savills’ report emphasizes the critical role of the UK’s build-to-rent sector, a rapidly growing segment of the private rented sector. These developments, purpose-built for tenants, typically consist of brand-new constructions located in high-demand areas.
The report highlights a current undersupply of rental properties, particularly in suburban areas, identifying the need for 550,000 new homes. Urban areas require 360,000 additional rental properties, while rural locations need 110,000.
Landlords seeking optimal rental prospects are advised to consider busy towns or cities, as tenants increasingly prioritize proximity to amenities and transportation links. Savills notes the allure of the ’15-minute neighbourhood,’ where all essential services are within easy reach.
While city centres remain popular, there is a noticeable uptick in the popularity of commuter towns like Stockport near Manchester, providing more affordable options outside major cities.
Emerging Trends in Build-to-Rent
For landlords aiming to capitalize on their rental portfolios, insights from the build-to-rent sector reveal key trends that could enhance their offerings and attract more tenants. Guy Whittaker, Associate and Head of UK Build to Rent Research at Savills, notes that properties in the build-to-rent sector, tailored for working families and co-renters, offer higher quality than the broader private rented sector (PRS). These properties, being newer, are cheaper to maintain, a feature increasingly sought after by tenants.
This trend extends to the wider PRS, with tenants showing a growing preference for higher quality, newer homes. Consequently, new-builds are gaining popularity among landlords, positioned as cost-effective, low-maintenance alternatives.
Build-to-rent developments are also proving attractive to young families and couples seeking a more permanent community. Traditional buy-to-let landlords can emulate this approach by offering higher quality properties, fostering longer-term tenancies, and potentially reducing the hassle of frequent property turnover.
As the UK’s housing landscape evolves, landlords are urged to adapt to emerging trends, ensuring their properties meet the changing expectations and desires of an evolving tenant demographic.