PRS requires 615,000 new homes by 2016 – Savills
Over 600,000 households will be created in the private rented sector (PRS) between 2014 and 2016, according to new research revealed recently at RESI 13, the UK residential conference.
A significant share of the new homes will be financed by major funds, such as APG, M&G, Macquarie and M3, all of which are seeking to take advantage of growing demand for rental accommodation across many parts of the UK by investing in the build-to-let market.
Despite the government's Help to Buy and mortgage guarantees, Britain's housing squeeze is continuing to drive more and more people to rent.
At its RESI 13 keynote presentation, Savills revealed that housing transaction levels remain 46% below their pre-crash levels, stifled by house price growth and mortgage affordability issues.High mortgage deposit requirements continue to limit affordability, especially for under-35s.
Levels of gross mortgage lending in the first quarter of 2013, when looking at 75-90% loan-to-value mortgages, remain just 33% of their Q3 2007 levels.
With housebuilders failing to develop the number of new homes needed to meet affordable housing demands, more households are being pushed towards to the PRS. Over the next eight years, the UK's increasing population will pile on further pressure, with the DCLG predicting there to be 221,0006 new households created in the UK each year to 2021.
Levels of owner occupation for under-35s have already fallen by a third over the 10 years to 2012, and the average age of a first-time buyer is now 37 - leading to enormous growth in demand for rented stock.
The PRS now accounts for 17% of the UK's housing market, and its share of the market has now overtaken social housing.
Lucian Cook, director of residential research at Savills, said: "The importance of transaction levels tends to be forgotten in the UK. By acting as a constraint on the supply of new homes, they accelerate PRS growth - and this means there is going to be continuing demand for years to come from a professionally developed and managed rented sector. While there are still obstacles to entry, not least low income yields - such high future demand will lead to considerably higher rental growth, which in turn will attract more institutions."