The UK’s private rented sector (PRS) is experiencing a period of rapid change, as the build to rent (BTR) sector continues to grow, according to analysis by AMA Research
A recovering UK economy and increasing interest by both UK and overseas large institutional investors are key elements in the recent expansion of the PRS. Rising demand for professionally managed PRS accommodation has led to the emergence of large-scale owners aiming to offer a bespoke, professionally run service to a large and growing market.
The build to rent sector has grown significantly in the last few years, in particular up to 2016, and the largest volume of BTR is coming through in urban city centres with London leading the way. There is also significant activity in Birmingham, Manchester and Leeds.
Growth in the BTR sector has remained strong and there are positive forecasts over the next few years through to 2022 in volume and value terms of around 4-6% each year, reflecting a combination of rising house prices, stagnant wages and tighter mortgage lending, a shifting demographic balance – the growth of the so-called ‘Generation Rent‘, shifting behaviour amongst the younger age groups, population growth, net migration of mainly younger adults, and workforce mobility.
The Government has looked to the build to rent sector as a way of easing the pressures of the national housing shortage.
As a result, a number of additional measures to make the sector more attractive have been introduced, including a reduction in the requirements to provide affordable housing in planning obligations, improving access to and affordability of land, and a stable regulatory framework in which to operate. That said, the planning system continues to present challenges to the viability and delivery of many PRS schemes.
Housing associations and local authorities have also increasingly been looking to the PRS as a means of alleviating local housing shortages and subsidising reductions in central Government grant funding.
Keith Taylor, Director at AMA Research said: “The PRS industry and the BTR sector have grown significantly in the last couple of years, and this growth looks set to continue in the medium term, with the rental market expected to expand by over 1m households over the next 3-4 years.
“The trend towards increased private renting is expected to continue driven primarily by the younger ‘generation rent’ demographic, which is being targeted with appealing lifestyle-branded homes.”
Institutional investors are expected to substantially increase their investment in the BTR sector over the next few years.