The amount of households living in the private rental sector could reach 7.2m by 2025, according to a report from accountancy firm PwC.
The study expects the number of those locked out of the property market – known as generation rent – to continue growing over the next decade. The company predicts homeownership levels to decline
Over 7m Renters by 2025, says PwC
from 68% to around 60% in the next ten years.
Additionally, PwC forecasts house prices to increase by 5% per year, making the average value in the UK a huge £360,000 by 2020. Alongside a lack of housing supply and high deposit demands, this means that many hopeful buyers will choose to rent privately for the long-term instead.
The report states that a quarter of all households will rent privately by 2025, with over half of those under 40-years-old living in the private rental sector. The majority of those aged between 20-39 will be renting from private landlords in the next decade.
This demographic includes students, families with young children and young professionals, who often prefer the flexibility of renting.
Young professionals in their 20s and 30s are more likely to change jobs frequently as their career progresses, especially if they live in big cities such as London, Birmingham, Manchester and Liverpool. They appreciate rental properties in city centres with good transport links and nearby bars and restaurants.
Sometimes, families with young children can enjoy renting privately, as they can move from a smaller home to a larger house as their family grows. Also, they do not face the financial pressures associated with owning a home, such as faulty boilers. Families generally look for rental properties with gardens, green space nearby and good local schools.
Students account for a large proportion of renters in large university cities. This is unlikely to change, as students very nearly always rent during their studies – they typically cannot afford to buy and require flexibility. Consequently, demand for student accommodation is always high and landlords don’t face much difficulty placing tenants. Regular rental income is pretty much guaranteed for most of the year, meaning that landlords earn strong rental yields.
The rising strength of the sector is good news for landlords, who will see more and more tenants interested in their properties. This will help eliminate void periods if investors choose the right places. Letting agents will also benefit from a higher level of landlords.