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Generation rent: what impact could this have on the private rental sector?

Posted by Anna Kaznowska 4 months ago

According to a recent survey published by the Department for Communities and Local Government, the average first time buyer in the UK is now aged 32.  First time buyers in the 35-44 age category have grown by over ten percent in the last twenty years. They are also increasingly likely to live in rented accommodation before getting a foot on the property ladder, with 66% of people now renting before buying their first property compared with only 39% twenty years ago.

As a result, the private rented sector is comprised of an increasing number of people in their late 20s and 30s, as well as families, with different requirements to previous generations of renters.

 An initial point is that this demographic may look for greater permanency from their rental homes before they are able to purchase their own property. Increased security and the opportunity to settle into their local area could be important considerations, particularly for those with dependent children.

This provides an opportunity for landlords willing to grant longer tenancies of around, for example, 3-5 years (as opposed to standard shorthold tenancy terms of between 6 months to a year).  Landlords could benefit from security of future occupancy and income streams. Tenants should be mindful, however, that landlords might also seek to increase the rent over time in line with open market valuations.

As well as a potentially greater number of buy-to-let landlords offering longer tenancies, professionally managed “build to rent” developments are particularly well placed to meet this need.

There might also be bolder alternative options for developers to meet an increased demand for more stable tenure. For example, purpose-built co-living spaces, in which facilities such as kitchens, gardens and gyms are pooled communally, are set to radically alter the makeup of the private rental sector.

This post was edited on Feb 13, 2018 by Karolina Labrenz

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