The UK’s PRS is expanding rapidly, but where should you invest in property?

Investment opportunity is huge in the UK’s buy-to-let market

If you pay close attention to property investment news, you get to see things that other, less savvy investors miss. With the experience to connect the dots, it can be almost like having a crystal ball.

Knight Frank’s 2017 report into the UK private rented sector forecast that 25% of all UK households will be in private rented accommodation by 2021. Its survey also provides some valuable insight as to who will be renting and why. Combine this intelligence with the latest rental market surveys, and it gives strong clues as to where the best places to invest in property UK may currently be for buy-to-let landlords.

Massive growth in the private rented sector is predicted

Great news for property investors: Knight Frank’s survey, conducted by YouGov, forecasts that there will be 800,000 more households in private rented accommodation in four years from now. That’s an increase of 16% on the estimated 5 million today. That’s massive growth.

Little wonder then, that according to the latest Landlord Voice survey from Simple Landlords Insurance, only 3% of buy-to-let landlords have been spooked by Brexit and are considering selling up. The same survey found that a third of larger landlords (those with five or more properties) is planning to invest further in the next two years. Well, wouldn’t you, given that demand for rental properties is expanding at such a rapid pace?

YouGov surveyed 10,000 tenants and 26 major property investors across the UK. Its findings give a great look at how the UK market may develop over the coming years. For example, in 2021, there are likely to be 14.3 million owner-occupiers, 5.8 million households renting privately, and 4.3 million in rented social housing. But it’s other findings that are key to devising your investment strategy, too:

  • Average net monthly incomes of tenants are between £1,000 and £2,000
  • 40% of tenants are spending more than 50% of their salaries on rent
  • More than two-thirds of tenants are saving for a deposit on a home
  • 68% of tenants expect to be still be renting in three years from now
  • 21% of tenants rent in a neighbourhood that is out of their purchasing price range

What are tenants’ concerns?

The research found that the primary concern for tenants was affordability of rent. 63% of those surveyed cited this as their main priority.

Second on the list was location. But this was only cited as the key concern by 24% of tenants.

Finally, only 8% of tenants said the size of the property was the main factor in their choice of rented accommodation.

Why do people rent?

The main reason that tenants said they were renting was to save a deposit for their own home. It was true of all age groups (including young families) except those in the 50 to 64-year-old age group, who said it was cheaper than owning their own home.

In the 50 to 64-year-old age group, 78% of those asked felt they would still be renting in three years.

The head of Knight Frank’s residential lettings division commented on the report and said that: “The flexibility that renting offers has reinforced its popularity as both a sensible and accepted solution for young couples without children and those living on their own, but also highlights an expected rise in older households over the next five years.” In other words, renting is becoming a lifestyle choice.

So, where are people renting today? Where are they likely to rent in the future?

Tenants are moving out of London… but going where?

All the latest rental market reports show that rents are rising, but that Londoners are looking elsewhere for cheaper rent. This ties in with one of the main findings of the Knight Frank report: a tenant’s primary concern is affordability of rent.

Countrywide’s rental survey found that the average rent across the UK is now £965 per month. In London, this rises to an average of £1,712. A massive difference. No wonder more than 64,500 tenants left London in the last 12 months – the highest number since 2007. Most of these (78%) went to rent elsewhere. These people moved further afield, where rents are cheaper. In fact, on average, they moved 101 miles away. A commutable distance, by train. The trend is for tenants to move to the Midlands or the North. And now we can join those dots.

Where is the rental market likely to be strongest?

The surveys and reports tell us that:

  • The PRS is growing rapidly
  • Invest in a buy-to-let property today, and the likelihood is that your tenant will expect to be renting for at least three more year
  • Older tenants are renting because it is cheaper than owning
  • Rental price is more important than location
  • London is decreasing in popularity for tenants, because of rental price
  • Tenants moving out of London are looking further afield and looking north

Tenants still want to buy in a location where they want to live long term, but to do so, they must first save a deposit. That means renting where it is cheaper to do so, but where they can still earn good money, or be within commuting distance to London.

For your next property investment, we suggest you consider the commuter towns, and Birmingham, Leeds, and Manchester. There is massive investment being pumped into the Northern Powerhouse. All three cities are benefitting, and businesses are beginning to relocate there. When HS2 trains start running, Birmingham will feel as close to London as Chelmsford in Essex feels today – less than 50 minutes.

Join the dots the easy way to make the best investment

Our research team monitors the data and property market news constantly. We analyse 108 data points across 324 UK areas. We ask questions, look for inconsistencies, and join the dots where others fail to do so. It’s a research strategy that has consistently proved to uncover the best property investment opportunities in the UK.

Contact one of the Gladfish team today on +44 207 923 6100 to find out why we believe that you should be investing in Manchester, Birmingham, Leeds, and the commuter towns.

Live with passion,

Brett Alegre-Wood

About the Author

Brett has over 20 years experience in all facets of property, he owns various companies centred around property and is the driving force behind the education and training at Gladfish. His companies have sold over £850 million in UK and London property and he manages over 1200 properties through his estate agency chain. Today he shares his time between UK, Australia and Singapore. He is married to Arlene and together they have 4 kids.

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