CBRE reports an increase of one million rental househ...

Accounting for 3.9 million households across England and Wales, the increase in the private rented sector has largely been facilitated by domestic buy-to-let buyers and overseas investors, according to CBRE.

Unsurprisingly, London continues to witness the highest increase of rental households, now standing at 25% of the capital’s total households. CBRE also identified that the already well-established rental markets in Manchester, Oxford and Reading, are already achieving well over 20% of households living in the private rented sector.

The Regional Investment Report, demonstrates that investors have primarily been focused on London based assets during recent years, however as stock becomes increasingly constrained and investors are less willing to take development risk, CBRE expects those investors to look further afield to build up their private rental portfolios.

For the first time in over three years, capital growth outperformed rental growth across all regions of the UK in 2013. As a result, this has led to yield compression. CBRE highlights the pick-up in investor demand could lead to further yield compression, which may be further amplified as more new-build stock is delivered to the market.

While those looking to invest outside of London have traditionally targeted assets offering higher yields, CBRE highlighted the potential for yield compression in today’s market, might lead to investors re-evaluating their yield requirements.

Jennet Siebrits, Head of Residential Research at CBRE, commented: “The robust performance of the private rental market in London, which continues to witness the strongest growth, has mostly been supported by employment growth in the business and financial sectors, affordability constraints and a lack of available mortgage products on the market.

“While residential rents in regional areas across the UK have not yet experienced rental prices in line with those of the capital, CBRE now expects higher rental value growth to permeate out to many of the regional towns and cities.

“CBRE forecasts rental growth to be at its highest in those locations where there is low house building coupled with large increases in population. In addition, the underlying economic backdrop - employment and earnings growth will be an important driver of future rents across the UK.”