Some fascinating figures and concepts have come out from a new piece of Savills research on how the private rental sector may increase stock to meet expected demand.
Savills says £200 billion of investment is needed over the next five years to meet the demand for private renting, but only £50 billion will come from buy-to-let mortgages - the ‘falling short’ BTL figure is accounted for partly because of lending constraints and partly because of persistently low completion volumes from mainstream house builders.
The PRS is now 4.8m households, up from 3.4m just five years ago. The prediction is that it will be 5.9m households - one in five - by 2016.
“Accidental Landlords and cash-rich private investors will not supply new private rented stock in anything like the volumes needed” claims Savills, so the outstanding £150 billion will have to come from a mixture of much larger scale private and institutional investment.
These big players, apparently, will be less driven by the prospect of capital appreciation (which may or may not return in any volume anyway) and will instead be driven by aggressively chasing higher rental yields.
If it happens - and it’s a big ‘if’ of course - then this may have a number of consequences:
the new-build sector in the south east will have to build more and offer its product at a bigger discount to bulk-buying large-scale investment;
the Midlands and north of England may get a look in, too, because yields are likely to be much higher there;
build-to-let, where investors construct and then manage private rented accommodation, may finally play the part in the PRS that many have predicted for so long; and
the planning system may be obliged to regard building PRS homes as “interchangeable, to a greater or lesser degree, with affordable housing” suggests the Savills report.
Much of this blue-sky thinking, backed up by persuasive data, was missed by papers when they covered the launch of the research last week.
The predictions may or may not come true. Remember, there were siren voices five years ago from across the residential industry, explaining how many homes HAD to be built to meet demand from prospective buyers: the buyers disappeared and the housing ‘crisis’ (then allegedly at boiling point) has simmered rather quietly ever since.
But at a time of retrenchment in the economy and the residential industry, blue sky thinking is what is needed to stimulate new answers to old problems.
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