The Future of The Private Rented Sector

29th July 2019 posted in Landlords Tenants

Given the importance of the private rented sector in England, people want to know what is likely to happen in the future. Renting is a way of life for many people, and of course, many landlords are reliant on the income they generate.

The English Private Landlord Survey 2018, published earlier this year, provides insight into the future of the private rented sector.

It is fair to say the private rental landscape in the country has changed substantially in the past decade. Between 2010/11 and 2017/18, the number of households in the sector increased from 3.6 million to 4.5 million. This represents an increase of 25%.

The increase means the private rental sector is currently the second largest tenure in England. The private rental sector is also said to play home to a fifth of households in the country.

One point of note about the private rented sector is that there is a notable level of turnover. The rate of change is significantly higher than it is in the social rented sector and owner-occupied houses. This is an outcome landlord must be aware of and prepare themselves for.

How big is the private sector?

While this is a question which may be difficult to answer as not all landlords provide information as they should, the figures associated with the Tenancy Deposit Protection (TDP) scheme are worth considering.

Around 3.4 million live deposits are held in one of the TDP schemes which are available in England. The report suggests TDP schemes represent between 56% and 71% of households in the private rented sector.

How do landlords operate?

The study states the vast majority of landlords in England operate as a private individual, as opposed to being part of an organisation or a company. The breakdown sees 94% of landlords in England serving as an individual while 4% operate as part of a company while 2% of landlords are part of an organisation.

Do many landlords have a portfolio of property?

Close to half of the recognised landlords have one rental property, 45% of landlords. 38% of landlords own either two, three or four properties while 17% of landlords own at least five properties.

Respectively, these groups account for 21%, 31% and 48% of the private rented sector. It isn’t surprising that while the group of landlords who own at least five properties is the smallest, this is the group which owns the most significant number of properties in the private rental sector.

In 2010, the percentage of landlords who owned just one property stood at 78%, so there has been a sizable fall in this group. There has also been a notable increase in the number of landlords who own at least five properties. In 2010, this was just 5% of landlords, so this has also risen considerably in recent years.

Majority of landlords are 55 or older

Close to 60% of landlords in England, according to the study, are 55 years old or older. A third of landlords are of retirement age, using rental income to fund their later years.

46% of landlords stated they became a landlord because the sector provided a better return on their money than other investment opportunities. 44% of landlords said they entered the industry so they could contribute to their pension.

There was also an admittance that few landlords enter the market as a full-time business. Only 4% of landlords state they let property as a full-time business, which means there is a need for a lot of support and guidance.

Tenants can be demanding, and they expect around the clock support. Landlords who don’t provide an around the clock service require additional assistance to meet the needs of their tenants.

Immediate plans

While it is not always possible to make long-term plans and aims with any conviction, most landlords have ambitions in the short-term. In the next two years at the time of being asked, 53% of landlords intended to maintain the number of rental properties they owned.

11% of landlords planned to increase the rental properties they own while 10% of landlords plan on reducing the number of properties they owned while remaining in the industry. 5% of landlords planned to leave the rental sector entirely.

What is likely to happen?

It is unreasonable to assume anything but continued demand for a rental property in England. While many people harbour ambitions of stepping on to the property ladder, the cost of doing so remains prohibitive. Therefore, there will always be a notable demand for rental property.

There is also the fact many landlords see the profession as a suitable way to earn a living. The increase in landlords owning a sizable portfolio of rental property between 2010 and 2018 indicates many landlords are keen to remain in the market and expand their options. In a further ten years, it is likely the proportion of landlords who own at least five homes will make up even more of the market.

One issue that may need addressing in the next decade is the level of landlords aged 55 years old or older. With a third of landlords in retirement, there may be an issue if a lot of landlords look to sell up.

The use of letting agents and property management companies working on behalf of landlords is already important but could become one of the most integral components of the sector in years to come. Therefore, it wouldn’t be a surprise to see a sizable increase in the number of these firms and professionals operating in the country.

If this does occur, landlords (and tenants) are advised to opt for experienced firms which provide a decent level of service.

At Hunters Forest Hill, we know letting and selling your home is hard, but we are here to assist you in the process. If you aim to buy, sell, let your home or rental property, we are active in New Cross, Peckham, Dulwich and Brockley, in addition to Forest Hill, so get in touch with one of the top three agents in London, and we will be happy to assist you.