Understanding The Private Rental Market. CIH Conference 23 rd January 2014 Selina Clark Public Sector

Transcription

1 Understanding The Private Rental Market CIH Conference 23 rd January 2014 Selina Clark Public Sector

2 Overview > How the rental market has changed > How is rental supply distributed across the country > Rental levels and rental growth > Where does affordable rent fit in > Affordability of private renting > Looking ahead 2

3 Rise of outright owners and renters 12,000 10,000 Dwellings (000s) 8,000 6,000 4,000 2,000 0 Own - no mortgage Own - mortgage Private rented

4 Growth of PRS as % all stock by region/country 30% 1991 % stock private rented by region 25% 20% 15% 10% 5% % England N East N West Y & Humber E Mids W Mids East London S East S West Wales Scotland 4

5 Growth of PRS stock per annum over selected periods Dwellings (000s) N East N West Y & Humber E Mids W Mids East London S East S West Wales Scotland Since 1991 Since intro of Buy to Let (1996) Last 10 year Last 5 years 5

6 Segmenting UK residential by tenure 9,000 8,000 No.of households (000s) 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Social rented Private rented Shared ownership Mortgage >100%LTV Mortgage %LTV Mortgage 50-75%LTV Mortgage <50%LTV Own outright 6

7 Age profile of renters v mortgagees Private renters Mortgagees > The chart shows the profile of renters by age compared to mortgagees. % renters > The age profile is skewed to younger ages with 52% of private renters are aged under 34 years. > In addition more tenants work full time (84%) than do occupiers (60%). > While initial terms are short the average length of stay is 2-4 years or over Source: English Housing Survey

8 Private rental market caters for a range of groups London pcm 2 bed Rest GB pcm 2 bed Corporate sector Lifestyle renters (could buy outright) 100% 90% 80% > % 90% 80% > % % Core rental market (unable to buy outright) 60% 50% 60% 50% % 30% Affordable rent 40% 30% Affordable rent LHA ( 500) 20% LHA ( 992) 20% Local Housing Allowance 10% < % < 500 0% 0% 8

9 2 bed houses < 20% national supply 50% 45% 40% Flat House % private housing stock 35% 30% 25% 20% 15% 10% 5% 0% 1 bed 2 bed 3 bed 4+ bed 9

10 Private rental delivers a different size of home > Bedroom numbers drive rents and pricing levels > Private rented sector delivers a smaller size of home > 74% owner occupied homes are 3+ bed > 62% private rented homes are 1 and 2 beds Source: ONS 10

11 Private rental market highly localised > The private rental market is high localised. 50% lettings occur in just 6% of the country > Hometrack have developed a classification based on size, coverage and liquidity of local rental markets > Mature - Activity across all property sizes - lower risk on voids and accurate assessment of rents > Active - Good liquidity for certain property sizes but higher risk over voids and rental levels for less liquid property sizes > Inactive - Low liquidity across the market and risk of voids and challenge accurately setting rents 11

12 Residential rents per month 2 bed property 2,000 1,800 > Two rental markets one in London and rest of UK Rent per calendar month 1,600 1,400 1,200 1, London South East Rest of GB > Rental growth outside London has been limited > Rents today broadly where they were 4-5 years ago > In London they are 10% higher explained in part by higher occupancy rates of rented housing 2008 Q Q Q Q Q Q Q Q Q Q Q1 > Rents to keep rising in near term January 20,

13 2010 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q4 Rental growth per annum - 2 bed Residential rental growth 2 bed median 15% 13% 11% London South East GB > Rental growth nationally have averaged 1.5% per annum over last 3 years 9% 7% > Rental growth for 2 bed homes across the S East has averaged 1.8% pa 5% 3% 1% -1% > Rental growth strongest in London averaging c.5-7% pa on affordability pressures and higher occupancy levels -3% 13

14 Private rental growth last 4 years 7.0% Rental growth per annum 6.0% 5.0% 4.0% 3.0% 2.0% Last 4 years average pa CPI last 4 years 1.0% 0.0% London Scotland East W Mids S East E Mids N East N West S West Wales Y. & H'side 14

15 What incomes/tenures work in which markets? 80,000 70,000 Buy outright Private rent > Establish incomes to afford different tenures Income required 60,000 50,000 40,000 30,000 Affordable rent (63% OMRV) LCHO 35% initial sale > Make sure there is a market for the housing tenure/product > Understand the choices for households 20,000 10,000 0 London S East East S West W Mids Y & Humber E Mids N West N East > Ensure strategies are tailored to market/affordability dynamics 15

16 Income required to access housing Basingstoke (2 bed) 50,000 45,000 45,000 40,000 35,000 30,000 25,000 24,000 30,000 23,000 27,000 35,000 38,000 28,000 33,000 20,000 15,000 10,000 5,000 0 Affordable rent (63% OMRV) 80% Private rent Shared ownership (LQ price, 25% sale) Shared ownership (average price, 25% sale) Private rent - lower quartile Private rent - average Buy outright - lower quartile Buy outright - average Help to buy (MIG) - average calculations 16

17 Looking ahead > Demand for private renting to remain strong deposit levels, economy, stamp duty > Help to Buy could reduce demand from marginal buyers top quartile impact > Rental growth to remain in check on affordability factors > If looking to invest in the PRS carry out local market analysis to pitch rental product into viable markets with minimal risk from recovery in housing market > In lower value rental markets consider value for money against other tenures and how this might change 17

18 Hometrack 6th Floor, The Chambers Chelsea Harbour London SW10 0XF January 20,