Conducted for Knight Frank by YouGov, the Tenant Survey reflects the views of 5,000 people living in the private rented sector across the UK. For the first time, the survey also includes 5,000 homeowners in order to draw conclusions on the differences between homeowners and renters.
It found that 35 to 49-year-olds have now overtaken young professionals (aged 25-34) as the largest group living in the PRS. This age group is also expected to show the biggest growth in households in the PRS over the coming years, with difficulty in obtaining a mortgage deposit to buy a home remaining a significant hurdle.
When choosing a property, affordability remains the key priority for 61% of tenants. More than one in ten tenants said renting allowed them to live in an area they could not otherwise afford. Location was the second biggest priority for tenants (23%), followed by the size of the property (10%).
However, the key driver for renting is the lack of a mortgage deposit, though this ranges from 71% of young families to just 41% of iGens (those aged under 25).
On average, 69% of tenants still expect to be renting in three years’ time, rising to 93% for baby boomers (aged 65-plus).
When it comes to priorities, tenants are more focused on ‘internal’ factors – amenities within an apartment, for example – than ‘external’ factors, such as local shops.
Knight Frank spoke with more than 25 of the largest funders and developers of purpose-built PRS and retirement housing to gather insight into how the market is set to develop.
Some 38% of respondents said they wanted to engage in providing ‘cradle to grave’ housing, for example, student housing right through to housing with extra care for older people.
The survey also suggests that, in five years’ time, 56% of investment will be outside London – up from current levels of 44%.
Meanwhile, the average net yield for professionally-managed PRS properties is expected to settle at around 3.9% in 2022.
According to Nick Pleydell-Bouverie, partner at Knight Frank and head of the agency’s Residential Investment team, there is a significant number of individual private buy-to-let landlords exiting the market as the government’s buy-to-let tax changes start to bite.
“Large-scale professional PRS landlords are well placed to absorb this, as well as satisfying some of the structural shortfall in our housing supply,” he said.
“A principal constraint on the delivery of housing is the estimated rate of sales for developers. The Institutional PRS market can significantly accelerate this through near immediate absorption. It is crucial that the UK government resists further legislation and taxation and enables the PRS market to significantly contribute towards the UK housing challenge.”
Tim Hyatt, head of residential lettings at Knight Frank, added: “Once again, affordability has emerged as a key reason for people choosing to rent in order to live in an area where they would not be able to buy.”
Despite this, though, average rents in Great Britain rose 1% in the 12 months to December 2018 as more landlords left the sector and level of stocks declined.
“The tenant fee ban, which comes in into effect in June this year, may also result in some landlords increasing rents to offset any extra costs,” Hyatt concluded.