8:01 AM, 2nd November 2022, About 3 months ago 7
The nation’s rental market could be in for a boom as historic housing market trends show that a decline in property sales also leads to a boost in the private rental market stock.
That’s according to Alliance Fund, the end to end real estate fund, which analysed both the sales and rental markets during the economic downturns seen during the Great Recession of the 2008/09 financial crisis and the more recent downturn spurred by the Covid pandemic.
Their findings show that in 2008 when the Great Recession hit, property sales volumes across England fell by 49.3% on an annual basis.
They then continued to fall by a further 3.1% the following year before rebounding by 6.4% in 2010.
At the same time, the level of privately rented stock available to tenants across England rose by 8.2% in 2008, an increase of 261,474 rental homes in a single year.
This was followed by a further 7.6% annual increase in 2009, with the addition of a further 261,264 privately rented homes pushing the size of the PRS to a record 3.705m homes.
When the initial market uncertainty of the Covid-19 pandemic hit, the level of homes sold across the property market in England also took a hit, falling 15.9% in 2020, by far the largest annual rate of decline seen since the Great Recession.
In contrast, the growth rate of the private rental sector had been showing a steady decline since 2009 and, since 2017, had been reducing in size until 2020.
However, when the Covid market downturn hit, the level of privately rented stock available across the market increased by 1.1% in a year, the first increase since 2016.
When analysing the market over the last two decades, the research by Alliance Fund shows that sales volumes have increased at a rate of 4.7% per year when the market hasn’t been blighted by an economic downturn, whilst the private rental market has increased by an average rate of 4.1%.
In contrast, during periods of economic instability, sales volumes have fallen by an average of 22.8% per year, while the rental market has grown at an average annual rate of 5.6%.
The CEO of Alliance Fund, Iain Crawford, said: “The jury is still out with respect to the current turbulence plaguing the property market and just what impact this will have in the long-term on the ability of homebuyers to secure mortgage finance, as well as the knock-on effect to house prices if they can’t.
“However, historic market trends show that should the housing sector take a hit, the nation could be in for a rental market boom, as more and more of us remain reliant on the private rental sector in order to keep a roof over our heads.
“This reduction in buyer demand will come as a worry to those investing and delivering new housing stock to the market, as they simply won’t be able to capitalise on the same level of opportunities available to them in a buoyant market.”