One in four households will be privately renting by 2021

That equates to 5.79 million households – up from 5 million today – with young professionals (aged 25-34) making up the largest proportion living in t

That equates to 5.79 million households – up from 5 million today – with young professionals (aged 25-34) making up the largest proportion living in the PRS.

Investor Survey

Knight Frank’s latest PRS research, The Multihousing Report, also indicates that institutional investment in the PRS sector is set to accelerate.

Recent policy changes, additional stamp duty on buy-to-let investments and the curbing of mortgage interest rate reliefs – marks a change for the PRS, but also creates potential opportunity for large-scale operators in the rental sector.

Large-scale institutional investment in build-to-rent or multihousing, which has emerged in recent years, is currently worth an estimated £25 billion. This is up from £15 billion at the start of 2016.

But a survey of the key investors and operators in the market, has led Knight Frank to estimate that by 2022, this market will be worth £70 billion.

Knight Frank spoke to 26 major investors and operators in the UK’s burgeoning multihousing sector, to gain insight into how the market is set to develop.

Currently, 65% of investment is in London, compared to 35% in the regions. Investors forecast that net yields in London will settle at 3.5% in 2021, compared to 4.4% in the regions.

Furthermore, 15% of all residential units currently under construction in London are multihousing, compared to 4% across England and Wales.

Moving forward, large-scale investors are looking at longer term horizons when it comes to build-to-rent, with two-thirds of respondents saying they will hold their assets for a decade or more.

Tenant Survey

The report also reveals the findings from Knight Frank’s Tenant Survey, conducted by YouGov, reflecting the views of more than 10,000 people living in the PRS – making it one of the largest surveys of its kind.

Analysis of more than 1.5 million data points highlighted the key priorities for tenants across the country.

The results show that 68% of renters still expect to be living in the rental sector in three years’ time. The key concern for tenants when looking at rental property is affordability, re-affirming the findings of the two previous Tenant Surveys.

Location, the second biggest priority is seen as a much larger concern than the size of the property itself.

Comment

James Mannix, head of residential capital markets at Knight Frank commented: “The strength of the UK PRS sector has grown demonstrably in recent years. As consumer demand for affordable, flexible accommodation continues to rise, PRS is firmly establishing itself as a key opportunity for institutional grade investment, due to its long-term potential.

“In order to enhance build-to-rent specifically, the main hurdles of planning policy and land supply must be addressed. With both issues being recognised in the recent Housing White Paper, we hope to see the government encourage more build-to-rent and help to better identify developable land.”

Tim Hyatt, head of residential lettings at Knight Frank, said: This is our most comprehensive national Tenant Survey to date and it shows the continued growth and expectation of what tenants want to see in the PRS.

“The flexibility that renting offers has reinforced its popularity as both a sensible and accepted solution for young couples without children and those living on their own but also highlights an expected rise in older households over the next five years.

“The number of people renting out of choice rather than due to affordability of ownership constraints is an interesting indicator of how the PRS market will continue to thrive in terms of tenant demand.”

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