ARE WE SEEING THE RISE OF THE PRIVATE RENTED SECTOR?
20th November 2012
MOHAMMED MAHROOF BSC (HONS) MRICS CONSULTANT MARK JENKINSON AND SON
It has been widely publicised that the population of the world is increasing. People are living longer and expectations for living accommodation have risen drastically over the last century. Clearly this scenario in itself has fuelled a rise in demand for housing. But the scenario has, in my opinion, been exacerbated by the world economic climate which has seen a reduction in house building not only in this country but quite a number of other countries too.
In this country in particular the demand for housing has seen a steady rise, as there have been very few major social housing projects, whether through local authorities or housing associations. Family units are getting smaller and people are choosing to live more independent lives, which has also seen an increase in demand for housing. In previous generations the average house was around 2/3 bedrooms with very few smaller units. This has changed quite significantly in the last decade or so, with many new 1/2 bedroomed apartments being built.
It means that people who would have moved into the owner-occupier or social housing sectors are now looking at the private rented sector as a real alternative for their accommodation needs. Clearly this has seen a major rise in demand but with a slower increase in supply. It is, in my opinion, becoming evident that housing tenure will see a change from owner-occupation with the new generation making renting their first choice. There are many reasons for this which I will elaborate on in a future article.
In this country there has been a strong preoccupation with owner-occupation through mortgage finance. As finance has become more difficult to obtain this has left many people with no alternative but to turn to the private rented sector. Many people have seen this as a blessing in disguise because they have become more footloose and are able to move for personal and work reasons more easily. In some cases people have rented property in locations where they would have found it difficult to buy and in return are living a better standard of life.
This leads me to the investment/developer world. There are opportunities for developers to build for renting. What I am talking about here is long term renting, where the property is not seen as a transitional move but somewhere people can lay down roots, as is the case in many parts of the world. I have heard that investors worry about government legislation around let property, tenant issues, returns to expenditure and a general lack of confidence in engaging in this sector of the market because of past experiences. I believe the private rented sector is the future of accommodation in this country. We are witnessing a change in tenure aspiration which is a difficult concept to accept in a society which has a strong owner-occupation ethic.
Maybe I am wrong but all the signs are there pointing to a rise in the private rented sector and for people looking for accommodation this may be good news as the standard and quality of housing will increase as demand on this sector increases. It is important that central and local government see this trend and puts in place measures which encourage this sector to develop. As there are vast amounts of land in these sectors maybe a way forward is to release this land in ways which encourage development in these difficult economic times.
One thing is for sure, demand for living accommodation is only going to increase.