Christopher Watkin talks about why has the lettings market grown so much in the UK over the last 20 years.
Independent Reports on the future of the Private Rented Sector
The Building and Social Housing Foundation (BSHF) is an independent research organisation that promotes sustainable development and innovation in housing through collaborative research and knowledge transfer. Established in 1976, BSHF works both in the UK and internationally to identify innovative housing solutions and to foster the exchange of information and good practice. They said in their recent Tenure Trends in the UK Housing System report (which can be downloaded by clicking on the image below)
"For the first time in a century the relative size of the owner occupied sector has declined and the private rented sector has increased significantly. If recent trends persist, the private rented sector would be larger than the social rented (council houses and housing association) sector by 2013 and by the end of the decade, one in five households could be private renters. It seems reasonable to assume that some of the likely drivers of recent changes in tenure mix will continue and, therefore, that the private rented sector will continue to grow."
The Smith Institute has recently published a report by housing policy expert Andrew Heywood entitled “The End of the Affair: implications of declining home ownership”. The report highlights the increase in the Private Rented Sector of the UK property market and considers its implications.
Key points highlighted in the report include:(which can be downloaded by clicking on the image)
• Home ownership in England has declined to 67.4%, and this appears to be a continuing trend. There has been a corresponding and rapid growth in the private rented sector (PRS) in England to 15.6% (3.6 million homes) from a low of 9% in the late 1980s, after which it began to grow. Although the proportions are different in Scotland and Wales, there are similar trends.
• The growth of the PRS over the past 20 years was a major success for successive governments. The Housing Act 1988 reversed three-quarters of a century of overregulation by introducing the assured short hold tenancy, allowing landlords to regain control of their properties by notice and enabling them to charge market rents. Labour introduced only very limited additional regulation to the sector and the Coalition has announced that there will be no additional regulation.
• The availability of buy-to-let (BTL) mortgages after 1996 was a major factor in PRS expansion. There is now a funding problem in respect of the PRS, because of the reduction in the level of BTL finance since the banking crisis.
• Overall, the government should accept that home ownership levels will continue to fall and should plan accordingly to promote the supply of rented property. This will involve finding a solution to the issue of funding the PRS. BTL finance will not be as generous as in the pre-2007 period and institutional investment is not currently attracted by the returns available. The 2011 Budget offered the prospect of financial concessions to raise financial returns in the PRS, but government may have to go further if an investment famine in the PRS due to a reduction in BTL mortgage finance is to be avoided.
The report goes on to say:
A larger PRS may assist in the promotion of a more mobile and flexible labour force.
Demand is increasing all the time. For example the English population is set to increase substantially by around 30% in the next 25 years.
Government should urgently consider whether further targeted tax concessions to both individual landlords and institutional investors are affordable and could be made effective
What do the press have to say?
On the front page of the Independent newspaper in June 2011, this article was run about first time buyers not being able to buy a property but still needing a house to live in http://www.independent.co.uk/life-style/house-and-home/property/britain-to-become-a-nation-of-renters-2291072.html
As the local councils aren't building any and Housing Associations lacking funding (as they get their cash from government), the only other option is renting. In 2001, only 10.6% of households were in renting. By 2009/10, according to the English Housing Report (downloadable on the link), the proportion had swelled to one in six households (15.6%) – a growth of one million more households in private rented accommodation since 2005/2006 .. look what this article believes is going happen by 2020! http://www.lettingagenttoday.co.uk/news_features/More-than-one-in-five-households-to-rent-privately
The private rental sector is very strong and growing rapidly. In 1971, 7% of UK households were privately rented. Today, two-thirds of rented property in the UK is owned by private landlords. This has risen 50% in the last ten years and Belvoir franchise predicts that this will increase by a further 50% in the next few years. These increases are fuelled by social changes, reduced job security, population mobility, changes in legislation and fluctuating interest rates. The Government believe the private rented sector will grow to 20% by 2020.
HM Government Private Landlords Survey - released Autumn 2011
The reports findings on profile of private landlords ...
Looking at different types of landlord, their level of involvement, the number of properties owned, relevant experience and qualifications, as well as how property is viewed and the proportion of landlords’ total income derived from renting.
• Eighty-nine per cent of landlords were private individual landlords, 5% were company landlords, and 6% were ‘other organisation’ landlords. These were responsible for 71%, 15% and 14%, respectively, of all dwellings in the sector.
• More than three-quarters (78%) of all landlords only owned a single dwelling for rent, comprising 40% of the total private rented housing stock.
• Twenty-two per cent of landlords had let properties for three years or less with two-thirds (69%) for 10 years or less. Only 5% had let for more than 40 years.
• Almost four-fifths (79%) of all landlords earned less than a quarter of their income from letting properties in the private rented sector with 21% of all landlords earned no income at all.
• Only 8% of all landlords in the private rented sector were full-time landlords with the remainder part-time landlords.
The reports findings on Ownership and property condition including energy efficiency ....
• The 2009-10 EHS reported that over two-fifths (41%) of all dwellings in the private rented stock were built before 1919 with just 13% being built post-1990.
• Fifty-four per cent of dwellings owned by full-time landlords were built before 1919 compared with 35% of those owned by part-time landlords.
• Over two-fifths (41%) of properties owned by longer-term landlords were built before 1919 compared with over a quarter (27%) of dwellings owned by new landlords.
• Three-fifths (60%) of all dwellings in the private rented sector were houses with a further 26% that were purpose built flats and 14% converted flats.
• Over half (54%) of all private rented dwellings met the Decent Home Standard, while over two-fifths (42%) of all dwellings have had an Energy Performance Certificate assessment carried out on them.
The reports findings on how the property was purchased ....
• Over three-quarters (77%) of all dwellings in the PRS were purchased by the landlord, 9% were inherited and 8% were built by the landlord.
• Fifty-one per cent of all dwellings were acquired since 2000, 25% in the ten years between 1990 and 1999 and 24% prior to this date.
• A mortgage was used when acquiring 56% of dwellings in the private rented sector, with personal savings being the next most common means of finance used to acquire 21% of dwellings.
• Seventy-seven per cent of all dwellings were acquired with the intention to let. This applied to 92% of dwellings owned by company landlords, 84% of those owned by ‘other organisation’ landlords and 72% owned by private individual landlords. However just 47% of new landlords stated they acquired the dwelling with the aim of letting it out.
• Over one-fifth (22%) of dwellings in the private rented sector were either once lived in or still lived in by the landlord.
• If the property became vacant tomorrow, 78% of landlords would expect to re-let. Of these, 59% of dwellings were expected to re-let at the same rent, 40% at a higher rent and just 1% at a lower rent.
The reports findings on the letting and management of privately rented dwellings
• Eighty-three per cent of dwellings in the private rented sector were let on the open market, with a further 9% being let to employees and 9% to friends or relatives.
• Private individual landlords let 88% of their portfolio on the open market while 85% of those dwellings owned by company landlords were let in this way. Only 58% of dwellings owned by ‘other organisation’ landlords were let on the open market.
• Two-fifths (40%) of dwellings owned by ‘other organisation’ landlords were let to employees compared with just 15% and 2% of those owned by company and private individual landlords respectively.
• Nearly half (49%) of dwellings owned by private individual landlords had been let to the present tenants for less than two years. This compared with around a third of dwellings owned by other landlords (34% of company landlords and 30% of ‘other organisation’ landlords).
• In 19% of dwellings tenants were in receipt of Housing Benefit or Local Housing Allowance.
• In terms of formal letting and management practices, nearly all landlords and agents (97%) made use of a written tenancy agreement, with 91% requiring a deposit, and 84% each requiring tenants provide references and for inspections to take place during a tenancy.
• A variety of references were sought from tenants renting dwellings in the private rented sector: financial references in the case of 55% of dwellings, employment references 53%, previous landlords 45%, and personal references 44%.
The reports findings on Landlord and Agent issues and information needs ..
• The converse was that landlords and agents did not consider the overall low rental demand a problem in 82% of cases, nor mortgage payments (76%) and finding reliable builders (73%).
• A third (33%) of landlords and agents who had heard of the Housing Health and Safety Rating System reported that 58% of the dwellings they were collectively responsible for had received some form of assessment for potential hazards. Ten per cent of dwellings assessed had been assessed by a local Environmental Health Officer.
• Nearly two-fifths of landlords and agents (38%) wanted more information on tenancy law with 34% of respondents wanting information on electricity regulations.
Conclusion .. we have two independent reports that state that they believe the number of rental properties is set to grow tremendously over the next decade. We will guide you, support you and help you become a letting agent in your town or city and make a real tangable business that you, your family, your staff and customers can all profit from. We have another report by the HM Government with Private Landlord Survey which shows there is plenty of business and opportunities for expanding and growing your lettings business.
We would now invite to look around our website. Thank you for your interest
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