U.K. Rental Property Market

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U.K. Rental Property Market

The average private renter in the United Kingdom (UK) is aged between 35 to 44, male, couple with no child, currently in a lower managerial and professional occupations socioeconomic category, employed full-time, and in the second quintile of income earners in the UK. Two trends in the UK rental market include the growth of middle-aged renters, as well as the growing pipeline of build-to-rent (BTR) apartments. Further data, insights, and information on the UK rental property market have been provided below.

Demographics

Age

Private Renters
  • 11.8% of private renters in the UK are aged between 16 and 24, while 31.5% are aged between 25 and 34.
  • 24.4% of private renters in the UK are aged 35 to 44, while 23.9% are aged between 45 to 64.
  • Only 4.6% and 3.8% of private renters in the UK are aged 65-74 and 75 and above, respectively.
Social Renters
  • 4% of social renters in the UK are aged between 16 and 24, while 15.4% are aged between 25 and 34.
  • 16.1% of social renters in the UK are aged 35 to 44, while 37.5% are aged between 45 to 64.
  • Only 12.8% and 14.3% of social renters in the UK are aged 65-74 and 75 and above, respectively.

Sex

Private Renters
  • 59.8% of private renters in the UK are male.
  • 40.2% of private renters in the UK are female.
Social Renters
  • 44.7% of social renters in the UK are male.
  • 55.3% of social renters in the UK are female.

Household Type and Marital Status

Private Renters
  • The household type of private renters in the UK breaks down as follows:
    • couple with no children: 24%
    • couple with dependent children: 21.8%
    • couple with independent children only: 2.2%
    • lone parent with dependent children: 12%
    • lone parent independent children only: 2.5%
    • two or more families: 1.4%
    • lone person sharing with other lone person: 10.8%
    • one person: 25.4%
Social Renters:
  • The household type of social renters in the UK breaks down as follows:
    • couple with no children: 12.3%
    • couple with dependent children: 15.9%
    • couple with independent children only: 4.2%
    • lone parent with dependent children: 16.2%
    • lone parent independent children only: 6.3%
    • two or more families: 1.7%
    • lone person sharing with other lone person: 2.2%
    • one person: 41.2%

National Statistics Socioeconomic Classification of UK Renters

Private Renters
  • The socioeconomic classification of private renters in the UK breaks down as follows:
    • higher managerial and professional occupations: 13.4%
    • lower managerial and professional occupations: 24.2%
    • intermediate occupations: 11.5%
    • small employers and own-account workers: 12.5%
    • lower supervisory and technical occupations: 8.9%
    • semi-routine occupations: 16.7%
    • routine occupations: 12.8%
Social Renters
  • The socioeconomic classification of social renters in the UK breaks down as follows:
    • higher managerial and professional occupations: 2.8%
    • lower managerial and professional occupations: 13.5%
    • intermediate occupations: 9.3%
    • small employers and own-account workers: 9%
    • lower supervisory and technical occupations: 10.2%
    • semi-routine occupations: 29.5%
    • routine occupations: 25.7%

Employment

Private Renters
  • 64.8% of private renters in the UK work full-time, while 11.6% engage in part-time work
  • 7.6% of private renters in the UK are retired, while 3.2% are unemployed.
  • On the other hand, 4.9% are engaged in full-time education. Additionally, 7.8% are inactive.
Social Renters
  • 27.5% of private renters in the UK work full-time, while 13.9% engage in part-time work
  • 27.7% of private renters in the UK are retired, while 5.5% are unemployed.
  • On the other hand, 0.6% are engaged in full-time education. Additionally, 24.8% are inactive.

The Income of Renters in the UK

  • The annual gross income of those in the first quintile is £15,211, while the same is £26,009 for the second quintile.
  • The annual gross income of those in the third quintile is £37,207, while the same is £51,744 for the fourth quintile.
  • Lastly, the annual gross income of those in the fifth quintile is £98,697
Private Renters
  • 19.2% of private renters are in the first quintile (lowest incomes) of earners, while 22.2% fall into the second quintile.
  • 23.4% of private renters are in the second quintile of earners, while 20.8% fall into the fourth quintile.
  • Only 14.4% of private renters fall into the fifth quintile (highest incomes).
  • Additionally, the average income of households in the private rental economy is £728, while the median income is £583.
Social Renters
  • 45.8% of social renters are in the first quintile (lowest incomes) of earners, while 26.3% fall into the second quintile.
  • 17.5% of social renters are in the second quintile of earners, while 8.2% fall into the fourth quintile.
  • Only 2.3% of social renters fall into the fifth quintile (highest incomes).
  • Additionally, the average income of households in the social rental economy is £408, while the median income is £326.

Psychographics

Life Satisfaction

  • Private renters in the UK have an average life satisfaction of 7.4 on a scale of 10.
  • On the other hand, social renters in the UK have an average life satisfaction of 7.1 on a scale of 10.

Satisfaction with Current Accommodation

  • Private renters (84%) are more likely to be satisfied with their accommodation than social renters (80%).
  • Private renters were also 73% satisfied with repairs and maintenance at their accommodation. For social renters, this figure stands at 66%.
  • However, private renters score the lowest when it comes to satisfaction about their tenure (69% of private renters and 83% of social renters very satisfied or satisfied).

Paying Rent

  • Private renters spend 33% of their household income on rent, while social renters spend about 28% of the same.
  • For younger private renters (16-24 years) this figure is considerably higher as they spend about 45% of their household income on rent compared to a range of 32% to 39% for older age groups.
  • Also, households with children tend to spend more on rent; lone parents with dependent children spend about 42% of their household income on rent.

Reasons for Changing Apartments

  • The most prevalent reason for moving to newly rented apartments for private renters was job-related (18%), followed by the need to move to a better environment (16%).
  • The need to move to a bigger home (13%) was the third most popular reason for private renters. Other reasons include "getting married and living together (4%), divorce or separation (3%), wanting to live independently (4%) and other personal reasons (5%)."
  • Overall, 72% of private renters ended their previous tenancies because they wanted to move, while only 12% were asked to leave by their landlords.

Reasons for Renting

  • According to a study of 2,000 private renters in the United Kingdom, 75% are happy to rent, and the most prevalent reasons for renting include:
  • "I don’t want to/can’t make the financial commitment of buying a home:" 46%
  • "I have fewer responsibilities than an owner (i.e. my landlord is responsible for most issues):" 40%
  • "I like the flexibility of renting:" 33%

House-Buying Aspirations

  • Only 58% of private renters think they would eventually buy a house compared to 25% for social renters.
  • This is even higher for younger private renters, with "77% of those aged 16 to 24 planned to buy, compared with 40% of those aged 45 to 64."
  • Most of the private renters (58%) who aspire to buy a house do not currently have any savings.

Savings Culture

  • "63% of private renters report having no savings. Just over a third (37%) of private renters reported having some savings. 11% of private renters had savings of £16,000 or more."

Common Challenges Faced when Looking for Rented Apartments

  • Prospective private renters decry the limited awareness to safety, noting that they were not always sure of how safe a property was perhaps because "either due to the landlord or letting agent not providing the required information or due to tenants not knowing what questions to ask to confirm the property met the required standards."
  • Private renters also note that while searching for rented apartments, there is typically limited information on "key details such as property accessibility, the length of tenancy available, the cost of bills and other criteria relevant to meet tenants’ individual needs." This usually led to time-wasting as the individual finds out the apartment did not meet their needs.
  • Prospective private renters also always feel rushed due to the pressure from landlords and letting agents.
  • Private renters also raised the issue of poor practices by letting agents which include issues such as "poor customer service such as showing tenants unsuitable homes, unpreparedness for viewings or not being able to provide detailed information about the home."
  • Often, private renters also do not have enough housing choices that meet their requirements. One of the often-cited constraints was finding affordable apartments. Asides this, renters were also limited by "finding properties of the right size or with the right number of rooms, in a preferred location, or because tenants’ themselves did not meet the rental criteria for example because they receive housing benefits or had accessibility requirements."
  • Renters also note that adverts for apartments usually contained false details and missing information.

Online Searches

  • Renters noted that the primary benefit for using online specialist property websites such as Rightmove and PropertyPal was to get access to "search across a wider net of properties than a single letting agent would be able to," citing that it saves them time.
  • They were enthused by the ability to narrow searches based on their preferred requirements such as price, location, and amenities. This was, however, not the case for renters on housing benefit or those with a health condition.
  • Renters believe that properties found on sites such as Gumtree and SpareRoom as cheaper than those they see elsewhere. However, they liked the fact that they could directly contact the person that placed the adverts.
  • Despite the benefits private renters perceive from using online channels, there were "concerns about a lack of information or the accuracy of the information provided on websites, for example about the deposit, rental price or the photos included."
  • Suggested features that renters have suggested include adding floor plans, including maps of the area the house is located, as well as providing a detailed description of the property accompanied by accurate photos; uploading videos was also included in the conversation.
  • Renters also cited late responses from online channels as a barrier when looking for apartments online.

ACORN Classification of Renters

Private Renters
  • The ACORN classification of private renters in the UK breaks down as follows:
    • affluent achiever: 11.2%
    • rising to prosperity: 19.1%
    • comfortable communities: 24.2%
    • financially stretched: 22.9%
    • urban adversity: 22.5%
    • not private households: 0.2%
Social Renters
  • The ACORN classification of social renters in the UK breaks down as follows:
    • affluent achiever: 1.8%
    • rising to prosperity: 5.5%
    • comfortable communities: 4.9%
    • financially stretched: 40.4%
    • urban adversity: 47.3%
    • not private households: 0.2%


Trends in the UK Rental Market

Middle-Aged Renters on the Rise

  • House prices in the UK have doubled in the last twenty years. Consequently, this has limited the number of 18-34 year olds who own a house — currently 6% — despite being 28% of the population.
  • During these twenty years that house prices have doubled, the younger groups that couldn't afford houses have aged to about 35-49 years. This group is now the most prevalent occupants of privately rented properties (PRP), while those aged 45-54 in PRP have grown by 33%.
  • "This age-group (35-49) is also expected to show the biggest growth in households in the private rented sector over the coming years, with difficulty in obtaining a mortgage deposit to buy a home remaining a hurdle."
  • There are also signs that these middle-aged groups may never even own a house considering 85% of renters in the UK are satisfied with their apartments.
  • This shift in demographics of renters has consequences for the rental property market. First off, renting is no longer a phase people use in their early years to save and invest in their dream house; it has become what most do till they are in their forties or the entirety of their lives.
  • Another consequence is that the needs of the older generations vary from the needs of the younger generation. For example, they prioritize energy efficiency with as many as 42% saying they factor in eco-friendliness in their rental decision-making.
  • Additionally, this middle age group is also more likely to have children. Currently, households with children account for 24% of the private rental market up by 10% from 20 years ago. As such, features like "family-friendly garden areas and making sure that features such as fireplaces and work surfaces don’t have sharp edges" appeal to this group, as well as promoting nearby facilities such as creche or childcare services.
  • This trend was cited by Hamilton Fraser and Knight Frank.

The Rise of the Build-to-rent sub-market (source 7, 8, 9,10)

  • Increasingly, more build-to-rent (BTR) buildings are in the pipeline. According to Knight Frank, there are about 132,000 units in the pipeline.
  • BTR developments "are performing strongly in regional cities, like Manchester, Leeds, and Birmingham, and larger schemes are on the way in these thriving cities."
  • One of the drivers of this trend is the government's provision of subsidies for the BTR industry. In 2015, the government set up a bundled a £3 billion Home Building Fund, out of which £1 billion was for the Build to Rent Fund.
  • In 2017, the UK government provided £65 million towards the development of Wembley Park in Brent, London. The development is to have 7,600 new homes, out of which 6,800 were BTR.
  • "Generation rent" is another driver of this trend. This group refers to the "22-37 age group who currently make up roughly 14% of the UK population but who cannot afford or don’t want to commit to, property ownership." BTRs are attractive to this group because they "offer longer than average tenancy agreements (of three years or more) and are usually professionally managed housing stock under single ownership and management control," as such give these young professionals greater security of tenure.
  • Other amenities such as pools, gyms, and communal areas are also attractive to 'generation rent'.
  • This trend was cited by Field Fisher, Knight Frank, and BuyAssociation.




Sources
Sources