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UK private rented sector more than doubles in just 30 years
October 8, 2015Article by Charlotte Ashton
Buy-to-let investors in the UK have known for several years that demand for high quality, well-finished rental properties is soaring. However, new figures from think tank ResPublica have thrown the situation into stark relief, revealing that the number of households privately renting has more than doubled in 30 years.
A huge shift
The huge shift means that some 22% of households now rent privately, compared with just 9% in 1985. One might be forgiven for assuming that the change has occurred due to there being fewer owner-occupiers these days. With mortgages now harder to obtain and rising prices this seems the logical result.
However, the data reported by ResPublica reveals that owner-occupancy levels now are precisely the same as they were 30 years ago, at 61%. In fact, it is the public rented sector that has declined sharply, in contrast to the rise of the private rented sector. In 1985 30% of households rented from public landlords. Today, the figure stands at just 9%.
A huge opportunity
The rapid growth of the private rented sector has created a huge opportunity for buy-to-let investors keen to grow their capital at the same time as earning an income from the properties in which they are investing. Ray Withers, CEO of specialist property investment company Property Frontiers, comments,
“The key to maximising returns is to invest in a property that is not just fabulous in terms of its interior, but that also enjoys an excellent location. Investors need to think about the property from the point of view of their tenants – how close are the shops? How many places can they easily commute to? What leisure facilities exist in the local area? These are the questions that tenants will be asking and if a property ticks all the boxes then demand to rent it is likely to be extremely high.”
Custom Quay is just such a property. The location couldn’t be better – an idyllic waterfront spot with a host of amenities on the doorstep, all just 15 minutes by tram from central Manchester, the city at the heart of the Northern Powerhouse initiative.
The 60 luxurious one and two bedroom duplex apartments, with communal roof terrace boasting stunning panoramic views, are ideal for the young professionals flocking to be part of Manchester’s future.
A long-term future
The Q2 tenant market analysis from BDRC Continental has observed rising tenant satisfaction within the UK. 80% of tenants are now satisfied with their current landlord, while 87% feel their rented property is their home (rather than just a short-term arrangement). According to BDRC Continential, the average tenant had lived in their current rented property for seven years as at Q2 2015. This is excellent news for buy-to-let investors looking for a stable, long-term income stream. Taking Custom Quay as an example, expected yield is 8.4%, based on two independent market appraisals. And all for a low investment price, with properties starting from £127,000.
Buy-to-let investors in Manchester are likely to benefit particularly from the growth of the private rented sector over the coming years. According the BNY Mellon, the city’s travel to work population (those who live within a 45 minute commute of the city) is set to double by 2025 – that’s an increase from 7 million to 15 million individuals in a single decade. With housing in the city already much in demand from tenants, it’s easy to imagine that yields may well increase over the years ahead as the level of demand increasingly outpaces supply.