UK – Growth in private-sector residential rents will outstrip house prices by almost 7% by 2017, according to Lucian Cook, head of UK residential at Savills.
Cook told a conference last week that growth in the £893bn (€1.06bn) sector would exceed 18%, compared to 11.5% for house prices. Rent paid by private tenants will increase from £48bn to £70bn as the so-called “equity divide”, unaffordable deposits and mortgage costs push 1.1m new households – 23% of the housing sector – into rented housing.
Citing “a distinctly urban feel” to private-rented sector forecasts, Cook pointed to favourable demographic trends, with 52% of renting households under the age of 35. The strongest take-up in the decade to 2011 (132%, compared with 86% for under-35s) was among 35-44-year-olds.
Yet despite investors’ focus to date on London and the southeast, some of the strongest 10-year growth has been in Manchester (95%), Liverpool (79%) and Bristol (76%).
With £380bn invested in the private rented sector in the decade to 2011, Cook said the sector needed further investment totalling £200bn. The number of housing completions has declined 46% since the credit crunch.
However, he warned work needed to be done to encourage growth in the sector, including government measures to ensure land supply, streamline planning rules and provide tax incentives for investors in the sector.
While developers seek to increase volumes of house building and forward-fund larger stalled projects, investors are looking for low-risk investment opportunities with competitive yields. That would necessitate changes in income yields, scale and management, Cook said.
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