Demand for rental property will grow by more than 1m households over the next five years, according to Savills. However, the firm questions whether investors will be able to keep up with demand.
Savills believes that demand will continue to rise, despite Government measures to clamp down on buy-to-let investors and initiatives to help generation rent become generation buy.
The Government has a target of building 400,000 new affordable homes for sale over the remainder of this Parliament. However, Savills claims the UK would still need a further 220,000 homes for rent each year.
Measures to increase homeownership may limit the demand for rental homes, but demand is so high that researchers at Savills predict that the sector will grow by 1.1m households by 2021.
In a recent report, Rental Britain, Savills states that the economic recovery and continuous low interest rate environment have done little to curb the growing need for rental accommodation.
Instead, property price growth has pushed homeownership even further out of reach for many, while rental stock in the social sector has diminished.
The English Housing Survey found that the private rental sector grew by an average of 17,500 households per month over the ten years to 2014.
Government housing schemes, such as Starter Homes, Shared Ownership and Help to Buy, hope to reverse this trend by helping first time buyers get onto the property ladder.
However, Savills warns that demand for rental housing could rise more sharply than it has forecast.
The firm says that the introduction of a 3% Stamp Duty surcharge for buy-to-let investors and second homebuyers and the reduction in buy-to-let mortgage interest tax relief could limit landlords’ abilities to expand their portfolios.
This could lead to more large-scale institutional investors stepping in to fill the gap, as they are exempt from the tax changes.
Whoever is supplying rental property, it is clear that the market will continue to be a lucrative investment.