The proportion of households living in the UK’s private rented sector will rise to 24% by 2021, according to new research by Knight Frank.
The latest English Housing Survey – covering England only – puts the proportion at 20% in 2015/2016, or 4.5m households.
Knight Frank believes that across the UK, there will be 5.79m households living in private rented accommodation within five years – up from a figure it puts at 5m today.
But it looks as though many of the beneficiaries of the growth in the sector will be institutional owners and investors in build-to-rent, rather than traditional landlords.
Knight Frank’s latest research, The Multihousing Report, also forecasts that institutional investment in the sector is set to accelerate over the next five years to £70bn.
Currently, Knight Frank believes the institutionally-backed build-to-rent market is worth £25bn.
If Knight Frank’s forecasts are correct, then there are clear implications for letting agents and whether they view build-to-rent as a threat or an opportunity – or both.
In addition, the report reveals findings from Knight Frank’s Tenant Survey, reflecting the views of more than 10,000 people living in private rental accommodation – making it one of the largest surveys of its kind ever conducted.
It shows that 68% of renters across the UK expect still to be living in the rented sector in three years’ time.
The key concern for tenants when looking for rental property is affordability. Location, the second biggest priority, is seen as a much larger concern than the property itself.
Knight Frank also spoke to 26 major investors and operators in the UK’s burgeoning multi-housing – or build-to-rent – sector.
Currently, investment is weighted towards the capital, with 65% of investment in London, compared to 35% in the regions. Furthermore, 15% of all residential units currently under construction in London are build-to-rent, compared with 4% across England and Wales.
Tim Hyatt, head of residential lettings at Knight Frank, 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.
“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 [our findings] also highlight 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 market will continue to thrive in terms of tenant demand.”