Renting: the new norm for millennials and future generations

Renting: the new norm for millennials and future generations

The UK property market has shifted markedly. For decades home ownership was seen as both the goal and the norm. Renting was viewed as a short-term measure – an option for those as yet unsettled in their career or those saving for a deposit, hoping to get onto the first rung of the property ladder. Now things are very different, and attitudes towards home ownership and renting are changing.

According to a survey by RICS, demand for rental properties has increased over the past year, with almost two-thirds of UK property agents reporting an uptick in demand. There are several driving factors, including, of course, rising house prices. According to the ONS House Price Index, the average house price in the UK is now over £250,000, which is more than ten times the average annual salary. For many, ownership is now simply unaffordable, and renting is the only viable option.

But affordability isn’t the only factor driving increased demand for rental properties. Many are now recognising the benefits of the mobility and flexibility it offers. And without the ties, outgoings and mortgage payments, renters can often prioritise experiences rather than the possession of bricks and mortar. As more people rent – and rent for longer – it is increasingly seen as a valid and practical choice.

Supply, demand and a changing sector

However, there are challenges associated with renting – and, unfortunately, it doesn’t always solve the problem of housing affordability. The supply of rental properties in the UK is low and in many areas, this is driving rents up rapidly. This is especially true in cities like London, where rents are among the highest in the world.

At the same time, landlords are facing an increasing regulatory burden. They have found it more difficult to manage properties and earn a profit. Changes in taxation along with moves which prevent agents from charging fees to tenants have resulted in landlords leaving the property rental sector. Eviction bans, introduced in response to the COVID-19 pandemic, have resulted in many UK landlords restructuring their portfolios and reducing the number of rental properties available. What’s more, many buy-to-let landlords are selling up before further restrictions proposed by the Renters Reform Bill pass into law.

Despite these challenges, landlords can still earn a good return on their investments. The average rental yield in the UK is around 5%, which is higher than many other types of investment. However, landlords need to be aware of the risks and challenges associated with renting and be prepared to work closely with agents and other professionals to manage their properties effectively.

The housing market is still adjusting, but looking to the future, it seems likely that renting will continue to grow in popularity, particularly among younger generations. We are already seeing changed attitudes towards home ownership and long-term renting will doubtless become a popular option for many people. Organisations such as Shelter – which provides advice and information on renting in the UK, including the rights of tenants and landlords – campaign for an effective property rental system, and the provision of affordable, quality housing. It’s what the country needs.

To sum up, we expect the shift towards renting in the UK property market to continue. We believe landlords willing to work closely with agents and adapt to the changing regulatory environment will still be able to make good returns. We also believe that an effective rental market will allow tenants to make informed decisions about their housing needs.