The Private rented sector has seen massive change over the last 12 months, which all the experts failed to predict. In the last 12 months the demand for rented accommodation in the UK has increased by such a massive rate that we now have a huge shortage of rental accommodation nationwide.
81% of agents across the UK in a recent ARLA survey state that they have more tenants than properties and have a shortage of property stock to meet the growing demand. The demands from tenants are now the highest for a decade and more surprisingly more than double that of the peak of 2007.
This has resulted in the average void period (time that a rental property is vacant) falling, dramatically in an unprecedented level from 4 weeks being the average void period in quarter 4 of 2009 to just over 3 weeks in the third quarter of 2010, that’s nearly a 25% reduction! The lowest levels since surveys on the Private Rental Sector began a decade ago.
The average age of the first time buyer has moved in the last decade by a massive 10 years too, with young people now not buying their first property until in their mid thirties (mid twenties 10 years ago) instead turning to the PRS.
The decline in property stock “for sale” in Estate agency windows is also causing a situation where there is not enough choice for people wanting to move. This has created a new phenomenon of “Generation Rent”. These people are being forced to look for rented accommodation and become “tenants” because they can’t find a property they want to buy and they don’t want to lose the sale they have agreed.
In any business when there is a tilt of the supply and demand for a product this always results in a price correction and this is certainly starting to be the case with Rents, these are rising nationwide and this has resulted in many tenants being unable to find suitable affordable accommodation. Many are now looking to house shares to meet the demand and even couples are looking now to start their life together in this type of accommodation, but this has identified a huge shortage of rooms suitable for “couples”.
The changes in the LHA will also start to increase the demand over the next few years, on the private rented sector as many long term tenants of the council will soon have to re-structure their living arrangements due to changes in their family size and LHA entitlement and will no doubt turn the PRS to fill that gap
All in all, the Private rented Sector is having a Boom time for demand. And the shortage of rental property is being fuelled by the lack of lending products still blighting the keen investor from providing the accommodation most needed.
Unfortunately however the future growth prospects, begs a few very important questions. Are we ready for this level of demand and responsibility? As many more people turn to the Private Rented Sector for their housing solution, we have to ask, is there enough regulation to support it? We keep hearing of unregulated agents, not looking after client funds and landlords being prosecuted because they have not adhered to the Housing safety standards, on the flip side we have the LHA payments still being sent to tenants that do not forward their rent onto the landlord and we continuously hear of tenants flagrantly flaunting the law to remain in landlords properties without any real reason causing huge distress to a small landlord.
The Private rented sector is still a market ran by private individuals in the main with the average landlord owning 5 properties. This means that many landlords are working full time doing something else and therefore are not qualified or skilled landlords in the main. Many turn to agents, that are sometimes, unregulated and themselves un-qualified.
If a landlord is entering the Private Rented Sector a few things you should look for are; choose an agent that is regulated by ARLA, RICS or another regulatory body and has client bonded accounts. Ensure that they have someone qualified to oversee the management of your units. Ask to see references from existing clients and make sure they have enough staff to do the job. As a minimum there should be 1 staff to between 50-75 properties managed on average. With the right due diligence you are entering a booming market that is set to soar over the next decade.