A rise in home prices and increased deposit requirements in Europe will lead to renters overtaking mortgage-owners by 2024, according to research by Greystar.
The report revealed that since 2010, urban household has grown by 10%, compared with the European population which has grown by 3% over the same period.
According to Greystar, the population ”growth is levered by urbanisation trends in towns and cities, which is then levered by the rise of single-person households”.
Independent of these trends, there has been a sharp rise in home prices around the world largely driven by supply-side pressures and historically low-interest rates, the rental housing firm said.
For instance, in Germany home prices have risen 20% faster than income and 25% faster than rents over the last five years. And cities like London and Paris are amongst the most expensive housing markets in developed countries in terms of home price-to-income ratios, the report said.
“Along with increased deposit requirements, this has put homeownership out of reach for many, with renting being the only affordable option,” it said.
Data showed that in 2010, 28% of the EU population were mortgaged owners but by 2018 this had declined to 26% and Greystar said market renters increased from 17% to 22% over the same period.
At these rates of growth, market renters will ”overtake mortgage-owners by 2024 – a trend that could be accelerated by the impact of COVID-19”, given falling household savings and rising deposit requirements, Greystar added.
Nigel Allsopp, senior director in charge of investment strategy and research at Greystar said it is widely understood that demand for housing is driven by demographic trends – the more households there are, the more housing they need.
“Most of this growth in urban household formation accrues to rental housing, as home price affordability is a barrier to entry for first-time buyers.
“As a result, we expect rental housing to overtake mortgaged owner-occupation over the course of the next cycle.”
Mark Allnutt, senior managing director – Europe, Greystar, said it is important to note that as aspirant homeowners rent for longer, they are more likely to have higher wages and a willingness to write a larger rent cheque for the right home.
“They will want a rental housing option that is well-suited to their needs and the expectations of contemporary lifestyles pointing to increased demand for highly amenitised build to rent properties.”
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