Please Note: This Article is 13 years old. This increases the likelihood that some or all of it's content is now outdated.

It’s not just single people and couples in their 20s or 30s who are renting.

A new sector of tenants is coming through – working families – and this is having an impact on the whole residential property market says David Lawrenson of buy to let consultancy www.lettingfocus.com and the author of the UK’s top selling buy to let book.

David Lawrenson says, “Recent research from the Alliance & Leicester has found that nearly a quarter of families are now renting or still living with their parents (See note 1)

And for over half of these, this is a lifestyle choice – in other words they are renting because it suits the way they live, not because they can’t afford to buy.

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It is thought there are a total of about 17 million adults not on the property ladder and other statistics from the lender, Abbey show that about 5.6 million of these could afford to buy but did not want the commitment. (See note 2)

And according to the A&L the trend for family renting will contribute to the private rented sector growing by 39 per cent by the year 2014.

Of course, most families will prefer a house with a garden but they may be disappointed because Britain’s past planning policies have led to builders building flats rather than houses.

So it’s no surprise then, that other statistics I receive, continue to show that not only are the prices of houses going up faster than flats but they are renting better too.

For example, figures from the lender Paragon show that gross rental yields on houses are about 6.3% compared to 5.5% for flats (see note 3)

So, its not just capital gains that houses are showing up well on – its good rental growth too.â€?

But why does this older generation – many of them parents – want to rent when they could buy?

Lawrenson says, “It could be that some are old enough to remember the last property crash which started in mid 1989 and in London lasted until 1995. (London was one of the worst hit areas and prices collapsed over 30% during this time.)

But I think the real answer is that first-time buyers – who today are aged around 34 on average – like the flexibility that renting offers them.

In the hire and fire culture that exists today, this desire for flexibility is as true for families as for professionals with no kids.

Renting means that they can stay mobile and be able to move, to find work or to re-train.

There are also other social changes going on, in particular the trend for people to get married (and start families later). Indeed, this trend preceded the current boom in house prices. Indeed a Council of Mortgage Lenders survey showed this was already happening right back in the mid 1980s.�

……But More Family Sized Homes Could Be on the Way

Lawrenson says, “Whilst the new planning policy statement (PPS3) just released by the Government may just shift the emphasis from high density development towards a bigger supply of family homes, this will of course take years to come through.

The previous planning guidance, PPG3 which came out 5 years ago, led to problems in some areas as it encouraged too much higher density development. In some towns this resulted in large numbers of flats getting built even though demand for them was low.

So it can be no surprise then that in some towns, the price growth of flats has been sluggish – and because there were too many flats (many of them bought by amateur landlords) so rents fell too.

The new PPS3 reforms seem to promote the provision of more family homes, so hopefully we could see the balance redressed towards builders building the properties we need.

But anyone buying property should take note that it will take many years before you start to see any impact on prices.

In the meantime, family houses which are in short supply will continue to prove to be a better investment than flats.�

About David Lawrenson

David Lawrenson is a buy to let consultant at www.lettingfocus.com

He is also the author of “Successful Property Letting -How to Make Money in Buy to Let� – now the UK’s best selling book on buy to let which has just sold its 10,000th copy since it came out 15 months ago.

He writes about or comments on property for various national papers, trade and consumer magazines and websites and is often asked to speak about buy to let issues for trade associations, exhibitions and private companies.

Increasingly he is asked to provide consulting advice for mortgage firms as well as advice and coaching to individuals about buy to let.

His advice covers all manner of issues from where and what to buy to helping with tenant management issues and many things in between.

For more information please see www.lettingfocus.com, write to david@lettingfocus.com.

Contact David Lawrenson on 07834 081 600

Notes on sources

1. A&L Press release 6th Nov 2006

http://www.alliance-leicester-group.co.uk/html/media/non-indexed/release.asp?txtTable=PressReleases&txtCode=PR0311061

2. Abbey press release 1 November 2006.

3. Paragon press Release 6th Dec 06

http://www.paragon-mortgages.co.uk/mortgagereference.nsf/news/06537618798C070C802571FD003A26D5

Please Note: This Article is 13 years old. This increases the likelihood that some or all of it's content is now outdated.

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