House prices rising at a much faster rate than wages is going to put home ownership out of reach for even more people in the future. Research suggests that about one in four households in Britain will be living in private rental accommodation by the end of 2021. An annual report by Knight Frank estate agency shows five million households, including about 1.25 million families with children, already live in private rental properties. This is forecast to rise to 5.79 million – a rise of 24% – over the next five years, along with 4.3 million social tenants and 14.3 million owner-occupiers. The agency commissioned a YouGov survey which also shows that about three-quarters of tenants live in homes owned by private landlords. However, in the future they are increasingly likely to rent from large-scale corporations.
It is not just millennials who are unable to get a foot on the housing ladder. According to Knight Frank, people in their early 20s – dubbed the iGens – are the latest to find the first rung of the property ladder is a step too far for them. They join the millennials and older couples, as well as single people and those renting while they save for a deposit to buy their first home. Another group which has joined the list of people who cannot afford to buy are older divorcees who find as a new singleton that they cannot afford to buy.
Many are spending more than half of their incomes on rent, particularly families, single people aged 50 to 64 and retired people. Altogether, 40% of tenants pay more than 50% of their monthly income just on rent. About 30% of people in rented accommodation are saving for a deposit to buy, while 21% say they rent because they can live in an area where they cannot afford to buy. Another 18% say renting is more affordable than a mortgage.
With more people looking to the rental sector for accommodation for many different reasons, the market is having to adapt to their needs. As well as family homes in good locations near schools and health centres, there is growing demand for high-quality properties in the cities. This is where the larger corporations are investing, with build-to-rents becoming more prevalent. This sector is worth £25 billion already, but is predicted to soar to £70 billion in five years’ time.