The most recent research from Knight Frank has revealed that the proportion of households living in the Private Rented Sector is due to rise by 24% by 2021.
Knight Frank’s research, entitled, The Multihousing Report, also shows that institutional investment in the sector is set to motor in the next five years to £70bn.
What’s more, the report reveals the views of over 10,000 tenants living in the sector – 68% of which feel they will be living in the sector in three years time.
Analysis from the key drivers in the rental sector, alongside the outlook for household growth, suggests that £5.79m households will be in the sector by the end of 2021.
Young professionals, aged between 25-34, make up the largest proportion living in the sector – lured by the increased flexibility and lower moving costs.
Recent policy changes, such as alterations to mortgage interest tax relief and Stamp Duty, have created an opportunity for larger investors within the market.
Larger-scale institutional investment in Build-to-Rent or Multihousing is now estimated to be worth around £25bn. Knight Frank forecasts that this could be worth £70bn by 2022.
Knight Frank spoke to 26 major investors and operators in the UK’s Multihousing sector, in order to gain an insight into how the market is set to develop. At present, investment is heavily weighted towards London, with 65% of purchases here.
15% of all residential units under construction in London are Multihousing, compared to 4% in England and Wales.
Looking to the future, larger scale investors said they are looking long-term for Build-to-Rent, with two-thirds of those asked stating they want to hold onto their assets for 10 years or longer.
James Mannix, Head of Residential Capital Markets at Knight Frank, observed: ‘The strength of the UK PRS sector has grown demonstrably in recent years. As consumer demand for affordable, flexible accommodation continues to rise, PRS is firmly establishing itself as a key opportunity for institutional grade investment, due to its long-term potential.’
‘In order to enhance Build-to-Rent specifically, the main hurdles of planning policy and land supply must be addressed. With both issues being recognised in the recent Housing White Paper, we hope to see the Government encourage more Build-to-Rent and help to better identify developable land,’ he added.
Tim Hyatt, Head of Residential Lettings at Knight Frank, also said: ‘This is our most comprehensive national Tenant Survey to date and it shows the continued growth and expectation of what tenants want to see in the Private Rented Sector.’
‘The flexibility that renting offers has reinforced its popularity as both a sensible and accepted solution for young couples without children and those living on their own but also highlights an expected rise in older households over the next five years. The number of people renting out of choice rather than due to affordability of ownership constraints is an interesting indicator of how the PRS market will continue to thrive in terms of tenant demand.’