The private rented sector (PRS) is booming. An increasing number of people are now living in rental properties and the PRS has overtaken social housing as the UK’s second largest form of accommodation after home ownership.
Much of this growth has been attributed to the fact Britons are finding it more and more difficult to raise the necessary funds to buy their own home. With house prices rising and wages struggling to keep pace with the cost of living, it’s widely believed a lot of tenants have no choice but to rent.
In a bid to help people take their first steps on to the housing ladder, the government has launched its Help to Buy Scheme, which provides funding for first-time buyers. But what sort of impact is the scheme going to have on the PRS? We take a look below.
A fall in tenants?
One potential result of the Help to Buy Scheme is that it could see a fall in tenants as some of the people who were forced into renting can now afford to buy a property. This outcome has been forecast by Chesterton Humberts, which predicted the drop in tenant numbers could see rents in London fall by as much as five per cent.
Richard Davies, residential operations director at the organisation, stated: “More landlords may find their tenant(s) giving notice as they move away from the PRS and into home ownership. Dependent on the scale of first-time buyers taking advantage of the Help to Buy scheme, this could seriously impact the number of rental properties coming to the market for re-letting, which could in turn see rental levels fall.”
Mr Davis was speaking in October 2013 and since then London rents have fallen, dropping from £1,156 to £1,226 in February 2014. However, this is a decrease of roughly 2.5 per cent rather than five per cent, and the average February rent was still up 3.1 per cent on the same month the year before.
A limited impact?
While Chesterton Humberts forecast Help to Buy would reduce PRS demand, a number of other commentators had claimed this will not be the case. In December, Lucian Cook of Savills told the Telegraph the number of people living in the rental sector will continue to increase despite the impact of the scheme, which he claimed will only boost homeowner numbers by 12 per cent.
This view was supported by Miles Shipside of Rightmove, who said: “More renters look set to buy in 2014, but saving a deposit still requires time and commitment, meaning that overall tenant demand is unlikely to change much. It could ease a little in 2015, but the reality is that many first-time buyers will still be priced out of buying.”
Meanwhile, a survey by the National Landlords Association found only a fifth of landlords were concerned about the impact of Help to Buy on the PRS. It would seem this optimism has proved well placed, as despite the scheme largely being a success, no drop-off in the number of tenants has been recorded. Indeed, HomeLet’s rental index for March 2014 claimed there has been an increase in the number of people renting as a lifestyle choice.
Commenting on the organisation’s findings, Martin Totty – chief executive at Barbon Insurance Group – stated: “We’re seeing an increase in the number of people who are opting to rent as their preferred choice of living … It’s an alternative housing solution for a range of people and it’s increasingly the preferred choice of many.”
Letting agents can make the most of this demand for rental accommodation by using specialist property rental software such as that provided by Rentman.