13th March 2015

Housing Market Note

RENTAL BRITAINS The Private Rented Sector’s Many SubThe growth of the private rented sector has been since the early 2000s. From housing 10% of households in 2000, it has grown to of households according to the latest English Housing Surveyimportant role in absorbing much of the pressure on our supply While national figures are useful for overall market trendsdifferent sub-markets in the private rented perceived traditional student and young professional market and nopeople. Tenants in the sector come from ahousehold type, age, and jobs. The sector now rich expatriates, young professional sharers and couples, families with children, migrant workers, pensioners and many others. All these groups have both different and overlapping motivations for renting, issues with the current market and desires for the Whether approaching the private rented secother interested party, it is important to keep all these subinvestment or policy that works for one subDevelopers and investors need to ensure they understand the potential size amarket demand for their homes as this will affand void periods. Meanwhile policy makers consequences by designing regulation for one part of another part. To highlight some of the spatial and demographic variations have used the 2011 Census to create the map below. Although the data is now four years old, the Census continues to provide useful and detailed information on our housing market. The map shows the most common household type living in ward with the shading indicating the proportion of all households living in the private rented sector. A fully interactive version covering the whole of Britain is availhttp://sav.li/prsmap

Figure 1 – Most Common Household Type Living in Private Rented Sector

Source: Savills using 2011 Census (if the interactive map doesn’t work for you, please try a

Note

The Private Rented Sector’s Many Sub-Markets

the private rented sector has been a defining feature of the housing market of households in 2000, it has grown to house 19%

of households according to the latest English Housing Survey. It has also played an much of the pressure on our supply-constrained housing market.

ul for overall market trends, they do not account for the many private rented sector. The sector has expanded beyond its

student and young professional market and now houses a wide range of come from a range of backgrounds, affluence levels,

now houses wealthy foreign students and income-young professional sharers and couples, families with children, migrant

. All these groups have both different and overlapping motivations for renting, issues with the current market and desires for their future.

Whether approaching the private rented sector as a developer, investor, policy maker or , it is important to keep all these sub-markets in mind. A development,

r policy that works for one sub-market may not be appropriate for another. Developers and investors need to ensure they understand the potential size and type of sub-

as this will affect rental levels, rental growth, letting rates, need to ensure they do not fall foul of unintended

consequences by designing regulation for one part of the market that negatively disrupts

To highlight some of the spatial and demographic variations in the private rented sector, we to create the map below. Although the data is now four years

to provide useful and detailed information on our housing market. e map shows the most common household type living in the private rented sector in each

with the shading indicating the proportion of all households living in the private rented . A fully interactive version covering the whole of Britain is available at

Most Common Household Type Living in Private Rented Sector

newer web browser)

Household w non

Residential Research

Neal Hudson Associate Director

020 7409 8865 nhudson@savills.com

@resi_analyst

Figure 2 – Change in Household Type

2001 to 2011

Source: 2001 & 2011 Census

2001

2001

2001

2001

2001

2011

2011

2011

2011

2011

0 500,

000

1,00

0,00

0

1,50

0,00

0

One Person (not pensioner)

Couple, no children

Household w dependent

children

Household w non dependent children /

Pensioners

Multi family

No. of households

13th March 2015

Housing Market Note

There has been an increase in almost all age groups and household types living in the private rented sector with the exception of those aged 75 and over. The largest household type within the sector is those with children. 1 in 4 households with children live in the sector while in 2001 it was just 1 in 10.

Figure 3 – Age of People Living in Private Rented Sector

Source: 2011 Census

Given the affordability pressures faced by many prospective first time buyers, it is no surprise to see a relationship between higher proportions of more affluent renters and stretched house purchasing affordability as measured by the house price to earnings ratio.

Figure 4 – Affluence of Private Renters & Local Housing Market Affordability

Source: 2011 Census, DCLG

With a wide range of sub-markets in the private rented sector, there are also a wide range of reasons for renting. private renters via YouGov in late 2013 found that 24% of people were renting because they liked the flexibility the sector. A further 8% stated that they were renting because they chose to invest their money elsewhere. Flexibility was of greater importance to more households but unsurprisingly (see my previous note) it was deposit affordability that was the biggest ownership and reason for renting across all market segmentsWith house prices expected to remain high relative to incomes for some time, it is likely that we will continue to see the private rental market expand with people living in it for longer. Meanwhile, homes in the private rented sector are more likely to be in poorer condition than other tenures. 30% are noncompared to 19% of owner-occupied and only 15% of social rented homes according to the English Housing Survey. With the prospect of growing demand, welcome increase in interest in the sector from institutional investors and this should help improve the quality of the sectorDue to the greater capacity for rental growth and sell additional services, many will focus on the more affluent end of the sector. However, many households in private rented housing are reliant on Housing Benefit (19% of adults in 2011) and in some areas this group of the rental market as shown by the map opposite. By far the most effective way to tackle unahouse prices) is by building more homes doing so, we need to ensure that our collective approach to the private rented sector meets the needs of all its This report is for general informative purposes only. It may not be published, reproduced or quoted in part or in prospectus, agreement or other document without prior consent. Whilst every effort has been made to ensure its accuracy, Savidirect or consequential loss arising from its use. The content is strictly copyright and reproduction of the whole or part of it in any form is prohibited wipermission from Savills Research.

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

No.

of p

eopl

e

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

Affl

uenc

e of

priv

ate

rent

ers

(exc

l. st

uden

ts)

<--L

ow

Hig

h-->

Age of People Living in Private Rented Sector

2011 Census Affluence of Private Renters & Local Housing Market Affordability

Source: 2011 Census, DCLG

in the private rented sector, a wide range of reasons for renting. Our survey of

2013 found that 24% of the flexibility offered by

t they were renting because they chose to invest their money elsewhere.

of greater importance to more affluent previous note) it was

biggest barrier to home reason for renting across all market segments.

to remain high relative to incomes will continue to see the private

people living in it for longer.

es in the private rented sector are more likely to be in poorer condition than other tenures. 30% are non-decent

occupied and only 15% of social rented homes according to the English Housing Survey.

there has been a in the sector from institutional

and this should help improve the quality of the sector. rental growth and the potential to

ocus on the more affluent end any households in private rented

(19% of private renting his group is a significant part

opposite.

affordable rents (and of all tenures. While

ur collective approach to the the needs of all its sub-markets.

Figure 5 – Housing Benefit in Private Rented Housing

Source: DWP, 2011 Census

This report is for general informative purposes only. It may not be published, reproduced or quoted in part or in whole, nor may it be used as a basis for any contract, prospectus, agreement or other document without prior consent. Whilst every effort has been made to ensure its accuracy, Savi

sing from its use. The content is strictly copyright and reproduction of the whole or part of it in any form is prohibited wi

00 to 04

05 to 09

10 to 15

16 to 24

25 to 34

35 to 44

45 to 49

50 to 54

55 to 59

Age of people

2 4 6 8 10House price affordability (price-to-

Size of bubble = size of market

2

Affluence of Private Renters & Local Housing Market Affordability

Housing Benefit in Private Rented Housing

whole, nor may it be used as a basis for any contract, prospectus, agreement or other document without prior consent. Whilst every effort has been made to ensure its accuracy, Savills accepts no liability whatsoever for any

sing from its use. The content is strictly copyright and reproduction of the whole or part of it in any form is prohibited without written

55 to 59

60 to 64

65 to 74

75 to 84

85 & over

2001

2011

12 14-earnings)

LondonRest of England