Over half of UK homes to be rented by 2032
Over half of UK homes to be rented by 2032
• Proportion of households renting privately on course to double within two decades
• Buy to let mortgages have financed less than a third of new rented homes since 2007
• Failure to build enough houses chiefly to blame for first time buyer frustrations.
Over half of UK homes will be rented by 2032 for the first time in sixty years if current housing trends go unchecked, according to a new report by IMLA (the Intermediary Mortgage Lenders Association) which assesses the growth of the buy to let (BTL) market and its impact on first time buyers.
Since 2007 the private rented sector has grown from 14% to 18% of households while owner-occupation has dropped from 68% to 64% and social renting has also fallen.
This has happened with BTL mortgages financing just 420,000 (32%) of the additional 1.31m houses in the private rented sector since 2007, with the remainder made up of cash or commercially-funded purchases and properties rented out by their existing owners.
The IMLA report identifies multiple trends driving the rise of private renting by creating extra demand, including: the fall in social housing; growing obstacles to homeownership; changes in the employment landscape; greater numbers of students; high levels of immigration; later marriage and rising separation rates.
It emphasises that failing to increase UK housing supply in line with population and household growth is the major cause of first time buyer frustrations and the heightened sense of competition for buying homes. Low interest rates and quantitative easing have also advantaged landlords, with financial regulations such as limits on interest-only mortgages adding to the obstacles facing would-be homeowners.
Demographic projections point to rapidly rising housing demand, with the UK population expected to reach 67.8m by 2020 and 75.3m by 2035.
If current trends continue without a major policy or economic shift to address the shortage of new homes, the majority of UK households will be renting in the private and social sectors by 2032 for the first time since the early 1970s – with homeownership increasingly the preserve of the old.
The continuing fall in owner-occupation and decline of social renting would also mean more than a third of households renting privately within two decades – twice as many as today.
Homeownership is already lowest among younger generations and this effect will gradually move up the age brackets, as more people struggle to buy in their 30s and beyond. Between 1991 and 2012/13, homeownership among 16-24 year olds in England dropped from 36% to 11% while among 25-34s it fell from 67% to 40%.
Peter Williams, Executive Director for IMLA, commented:
“There are many misunderstandings clouding the growth of buy to let, including its impact on first time buyers. This report is a fresh look at how and why the private rental sector has grown. It asks important questions about our current direction of travel and the failure to build enough homes to support the rising population.
“Growth of the private rented sector has been from a historically low base and has been fuelled by strong underlying demand. If current trends continue then demand for private rented property is likely to drive further expansion and increase the burden on our already-overstretched housing stock, at a time when first time buyers are also feeling the pressure of new mortgage market regulations.
“Pressure is likely to grow for planning restrictions to be relaxed to support a large increase in new building and address the chronic failure to keep up with housing demand. The inescapable conclusion is that we need a proper joined-up strategy to adequately serve owner-occupiers, tenants and landlords, and put an end to key forces pulling in opposite directions.”
For further information please contact:
Andy Lane / Rob Thomas, The Wriglesworth Consultancy
Tel: 0207 427 1400
NOTES TO EDITORS:
IMLA is the specialist trade body representing the interests of lenders who market their products primarily through brokers, rather than direct or through a branch network. IMLA provides a unique opportunity for senior industry professionals to meet on a regular basis to discuss key current initiatives and contribute actively through IMLA and other forums, such as the Council of Mortgage Lenders.
IMLA was formed in 1988 as the Association of Mortgage Lenders and was instrumental in the creation of the CML. It changed its name to IMLA in 1995. Subsequently IMLA helped bring the Association of Mortgage Intermediaries (AMI) into being and was instrumental in bringing the mortgage advisers qualification CeMAP to fruition. More information can be viewed on the IMLA website