Press & News

The Rise of the UK Rental Generation

02 06 2019

There's no denying that getting on the property ladder is a significant challenge for many people today. However, renting is also becoming an increasingly attractive option. As the number of people renting continues to rise, we look at some of the driving forces and what it means for property investors.

Continued increases in property prices mean that taking the first step on the property ladder is a distant dream for many young people today. Millennials (those born between 1981-2000) have been nicknamed “Generation Rent” as many have no choice but to continue to rent for a longer period of their lives.

Home ownership is simply too far out of reach and the numbers speak for themselves. After adjusting for inflation, average house prices in England have risen by 173 per cent since 1997, compared with increases in young adults’ real incomes of only 19 per cent.

In the ten years from 2008-2018, home ownership by those aged 16-34 dropped from half to a third. Some studies suggest that up to a third of millennials will never be able to own their own home and that half will rent into their 40s.

With such a deep-set issue of intergenerational inequality to contend with, as well as rising student debt, welfare reforms and a tough employment market for new jobbers, we can reasonably expect to see the lifespan of the UK rental generation grow longer and longer as the gap between past and present widens.

However, it isn’t just a matter of affordability. Renting is increasingly becoming a preferred choice, due to the flexibility, convenience, and high standards it can provide.

Who is Generation Rent?

Contrary to popular belief, this demographic is not entirely made up of the under-40s. A growing number of over-60s are joining the rental market with research from The Centre for Ageing Better (CfAB) showing that the number of over-60s renting privately has risen from 254,000 in 2007 to 414,000 in 2017, There are also predictions that a third of people over 60 could be living in private rented accommodation by 2040, which is clearly good news for property investors as their pool of potential renters grows larger.

Many older people are choosing to downsize and help their children and grandchildren take their first step on the property ladder, while others are choosing to rent a smaller property in a more desirable area. For example, with many retirees wishing to live among the hustle and bustle of the vibrant UK capital or buzzing northern cities, renting is a way of getting around high property purchase prices to live in a desirable area and maintain a good quality of life.

Generation Rent and Investors

Purpose-built build-to-rent properties go some way towards assuaging the insecurity that many renters feel, with this sentiment especially common among the older generations. With many of these purpose-built properties developed by institutional investors, they typically include long-term contracts and rent that includes not only running costs such as electricity, gas and water but also added extras that will appeal to all ages. These commonly include access to an on-site gym as well as concierge services, for added security and enhanced quality of living. This is especially important as it guarantees a safe, secure home for renters of all ages, such as the over-60s and families with young children as well as those living alone.

Another trend that we are witnessing is an increased demand for residential rentals in towns and city centres, as rental prices make these desirable areas far more accessible to all. In fact, MRI Software research into the UK marketplace shows that more than nine in ten (91%) of the top executives and managers in the property sector say that ‘Generation Rent’ prefer to live in town and city centres for easy access to popular amenities such as gyms, bars and shops.

Retail and Build to Rent

As rental properties become more and more desirable, there is the very real possibility that younger people will choose to continue to rent even when property purchase becomes more affordable, as the range and quality of accommodation are so impressive. Professional property management is pushing up the standards all the time which is great news for urban property investors amid an increasing number of opportunities.

This is also a major turning point as the growth of mixed-use locations and the transformation of former centrally located retail premises into build-to-rent developments are opening up opportunities, Key property market players are making major investment into such developments and modern technology is also playing a major role in the development of a ‘work, live, play’ culture that plays directly into the needs and desires of prospective tenants.

Investment Opportunities

For those interested in build-to-rent and buy-to-let investments, there has never been a better time to take advantage of the UK rental generation. There is a solid level of demand from those who simply cannot afford to buy and a wide range of new builds across the UK offering a prime opportunity for investment with a positive growth curve.

For more information on build-to-rent, buy to let and growing opportunities for property investors associated with the UK rental generation, contact Alesco today. Our expert team have a range of specialist opportunities available for every type of property investor where quality and returns are the utmost priority.

Our portfolio for 2019 is focused on the UK’s Northern Powerhouse of Manchester, Liverpool, Leeds and Birmingham and the areas we have forecasted to deliver the highest returns over the next five years. We look forward to introducing you to opportunities in collaboration with leading developers and prime property locations.

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