The Strutt & Parker “Housing Futures” report 2014, identifies, as these researchers see it, the major drivers bringing change to the UK’s housing market, and make the case for tracking the trends that “fundamentally shift the way in which we live over the long term.”
Noting the immense social changes that have taken place over the last three centuries, the report says:
“Today, our high streets are in flux, our office environments are evolving and the way in which we manufacture and deliver goods is changing. It is our belief that once again we are in the midst of a demographic and technological revolution, and that whether you are a buyer/seller, an investor, a developer, a renter or a government entity, the belief that our housing industry will remain as it has for the past 30 years is unwise.”
Major trends identified are (1) single occupied households and alternative family households are on the rise, (2) the younger generation is more open to the idea of renting, and (3) retirees are seeking more interactive environments.
Government policy, human nature, accessibility to quality transport, changing immigration patterns and the performance of the financial markets the report states, all have a significant impact. By combining these factors, the researcher have identified four unique “cornerstones” to the market:
The market went from record high ownership in 1971 when it overtook renting for the first time, with home ownership seen as an essential investment in life, only to be reversed in the new millennium, with renting growing substantially in proportion.
Population growth in major cities (demography), low levels of supply in high-demand areas and the lack of affordability (finance and location), and footloose workers who don’t desire to own (lifestyle) are identified as the major drivers for change:
(1) Single living is much more common,
(2) Long-term rendering, the so called Generation Y (those born between 1978 and 1995) or now dubbed “Generation Rent” are living in private rentals for longer. 45% of 18-29 year olds said that they would consider living in a professionally managed private rental unit.
(3) Availability of technology with broadband and mobile coverage high priorities for many.
(4) Changing family structures or more families living like “ The Waltons’ – multiple generations under one roof.
As house prices have become more unaffordable in many parts of the UK, long-term renters are driving the expansion of the lettings market, and this is a trend the researchers see increasing over the next decade.
Private Rented Sector (PRS) demand grew from 9% of housing stock in 2001 to 16.5% in 2011, and this is projected to increase to 37% by 2025 in London. Growth in the rental market has been underpinned by delayed family formation, greater student debt and the increase of one and two -person households.
Traditionally, certainly since the World War II, British culture has been one of homeownership, but in other countries, PRS is much more widespread. The report states that:
“The PRS [of the future] is likely to be largely delivered by investors (pension funds, insurance companies, etc). As such, it is hoped that the quality of product will be high and the service offer akin to that in the US today.”
The Strutt & Parker “Housing Futures” report 2014, can be viewed here