Why is the UK private rental sector set to dominate by 2025?

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Why is the UK private rental sector set to dominate by 2025?

Investment in the UK’s private rental sector (PRS) will soar to £75 Billion by 2025, with an additional 560,000 households expected to be in private rented accommodation by 2023, according to the latest tenant survey report by Knight Frank.

With changes to buy-to-let taxes, a significant decline in buy-to-let mortgages and the fight for young families or first-time buyers to get onto the property ladder, the significant growth of the PRS comes as no real surprise.

The rental demographic has shifted

The Knight Frank report has unveiled an interesting demographic shift for the PRS, where young professionals, aged 25 – 34, are no longer the most prevalent group.

Instead, those aged 35 – 49 are now dominating this space, and although within the middle-aged bracket, those at the higher end are less likely to receive the best mortgage rates and are, therefore, more likely to remain in private rented accommodation for years to come, fuelling the sector’s continued growth.

This is confirmed by the fact 69% of tenants who participated in the Knight Frank survey expect to still be living in rented accommodation after three years, rising to 93% for baby boomers [aged 65+].

Investment hotspots are changing

Currently, investment in London’s PRS outweighs the rest of the UK, but over the next five years this will change, with growth predicted for key locations Birmingham, Bristol, Manchester, Leeds, Cardiff and Edinburgh.

Why? There is an increased demand for property outside of London, where key UK cities have received investment and experienced economic growth as a result, with Birmingham representing an excellent example of regeneration.

The pending HS2 line will also drive increased property demand and development, enabling commuters and professionals to travel between core cities at ease and with speed.

Private rental schemes, therefore, will enable tenants to live comfortably in these high-demand vibrant city locations, without concern over the cost of purchasing a property, in turn contributing to the continued growth of the sector.

Source: Property Investor Today

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