Why tenant demand is likely to be the new constant in UK property

Why tenant demand is likely to be the new constant in UK property

Tenant demand is important for any investor, and here’s why it’s not likely to go away any time soon.

For anyone considering investing in the UK’s private rented sector for the first time, one of the major concerns will centre around the potential longevity of the market’s strength, and their own ability to see a strong income level for a number of years.

With average rental prices across the UK hovering around the £750 to £800 mark consistently for some time now, short-term prospects and yields are strong, but many newcomers to this branch of the property investment market will want to know if this translates to the long term as well.

Here, Experience Invest looks at why tenant demand, which is driving rental price gains, is likely to be a constant for some time in the UK.

Tenant demand

There are currently as many as five million people living in the UK as private rented sector tenants, which is a higher volume than has ever been seen nationwide. As home ownership has dwindled from peaks of around three-quarters to less than a third in recent years, the volume of Brits becoming private tenants has climbed markedly.

It was a trend that we started to see in the aftermath of the 2008 financial crisis. Property prices had peaked in 2007, and the market collapsed in 2008, sending values spiralling and leaving people with rock bottom confidence in the future of the property market.

It meant fewer buyers coming to market and more people offloading their own homes while they could, but even as the market has returned to a position of strength, where 2007 peaks have been topped and property prices have been growing for six years, tenant demand is yet to dwindle.

Even at a time when mortgages are cheaper than they have been for some time thanks to the low base rate and prices are higher than they have been ever, and are still growing, tenants are still hanging around, and becoming even more plentiful.

So why is this, and what is likely to keep demand strong over the next few years?

Rental property positives

The main reason that we’ve seen the rental market become more prominent over the course of the last year or so is the simple fact that it fits better into people’s lives than it ever has before, especially in the purpose-built sector.

New build homes for the rental market now tend to be located in places where the largest demographics, students and young professionals, are working and studying, which means that they have convenient access to housing that allows them to develop a good work-life balance, the number one key to happiness in the modern world.

In addition to this, rental accommodation gives younger people the flexibility and freedom they crave in a way that ownership never could. Millennials are the new breed of worker, and they are also more prone to ‘job hopping’ than other generations have been. This means moving from job to job to further their career, and what often comes with this is the need to move from location to location.

For those who own a home, this creates a problem, as it can take them a long time to find a buyer and somewhere new to live. But for those who are renting, it’s not a problem, as their shorter-term commitments mean they can move at short notice and have that freedom to further their career.

And over the coming years, with more millennials, and Generation Z, coming into the workforce, it’s only likely that this trend will continue to grow, meaning that a new generation of renters will become the major market force in the property sector. This is likely to mean a further fall in home ownership and a rise in renting, giving investors that long-term peace of mind they are looking for.

Author: experienceinvest

Trading since 2004, Experience Invest is a London-based independent property specialist. The Company proudly offers opportunities to property investors in the UK and overseas, through providing exclusive investments across a variety of asset classes.

Website: http://experienceinvest.com/

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