9:50 AM, 24th May 2011, About 12 years ago 2
If you’re into statistics about the private rental sector the latest report from Paragon will keep you happy for quite some time. The report, which is 32 pages long, has been summarised below. A PDF of the report can be downloaded here.
Paragon also released their half year trading figures today, download the PDF here.
The Paragon Group of Companies has today issued a white paper that analyses the history and growth of the private rented sector (PRS) and buy-to-let (BTL) markets, and sets out the opportunities and challenges for the future.
The paper looks in detail at the state of the UK BTL market in 2011 and how it has influenced the wider PRS – a sector now valued at over £500bn, more than the entire UK commercial property sector. There is in-depth analysis of factors that have driven the rapid growth of BTL since its inception, how it was affected by the Credit Crunch and what the future holds for the PRS in the UK.
A total of 3.4 million households now live in rented accommodation. This is an increase of 1.4 million (70%) since 2001, and represents nearly one in six households. This is predicted* to increase to more than one in five by 2020, as falls in numbers of both owner-occupied households and social housing look set to make private rental the second most popular tenure in the UK. In particular, the steep decline in the availability of social housing – which between 1991 and 2009 fell by 17% from 5.9 million to 4.9 million properties and from 24.8% to 18% as a proportion of total housing stock – means that, for many, the PRS is now the only real alternative to home ownership.
The current economic environment is placing severe pressure on the PRS, with rising levels of tenant demand outstripping the number of properties available for rent. Department for Communities and Local Government (DCLG) figures show a dramatic rise of 300,000 in the number of PRS households between 2009 and 2010 alone, something which is leading to ongoing rental inflation. A recent RICS Residential Lettings Survey showed that the rate of rental growth is at an all-time high.
Social change will drive much of the increase in demand. The number of UK households is forecast to grow by 6.3 million to 27.8 million by 2031, the equivalent of 252,000 new households every year. UK population growth, net migration, growing numbers of single-person households, people starting families later in life and an increase in the age of first-time buyers are all increasing long-term demand for rental properties.
Key to the continued growth of the PRS is the availability of finance for landlords in the form of buy-to-let mortgages. There are currently 1.3 million BTL mortgages in the UK, with an aggregate value of some £152 billion following a 22% increase in lending in 2010. But the lending market has seen huge change; there were 3,468 buy-to-let products available at the peak of the market in July 2007 – today there are around 330, a decline of 90%. Although lending increased in 2010, it is still well below its 2007 high of £44.6 billion.
Commenting on the report, Nigel Terrington, CEO of Paragon, says: “The private rented sector is likely to expand significantly over the next decade, and is set to overtake social housing to become the UK’s second-largest housing tenure, after owner-occupied. For that to happen, a vibrant and healthy buy-to-let mortgage market is vital, and the Government must foster a regulatory environment that encourages investment by landlords, thereby allowing an efficient private sector solution to the housing challenge facing the UK in the years ahead.”