Growing house prices are driving the U.K.’s rental market to new levels, according to a new report by Hamptons International.
The estate agents anticipate that 20.5% of households in the U.K. will be renting their homes by 2020, up from 19.4% today. By 2025, six million households will be rentals, the report said.
The higher demand for rental accommodation is being pushed up by house prices “consistently growing above incomes,” the report said, which in turn is driving home ownership down.
The increase in rental demand comes despite landlords purchasing fewer homes. Since the introduction of the 3% stamp duty surcharge in April 2016 for those buying additional residential properties—like second homes or buy-to-let properties—landlords have sold 50,000 more homes than they have bought, the report said.
But the sector is not wholly dependant on individual landlords. The report notes that though investor activity has fallen, there are more ways that homes come onto the rental market, meaning the rental market can continue to expand even as the number of landlord purchases stays slow.
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A large number of homes move into the rental market when price growth and activity dwindle in the sales market. In 2017, an estimated 80,000 homeowners who tried to sell their homes decided to put those sales on hold and rent their properties instead, the report said.
Likewise, couples who decide to move in together, landlords who inherit property, people who relocate for work or simply keep a home as an investment are common reasons for homes to find their way onto the rental market. While the professional build-to-rent market is small currently, the report estimates that there are more than 100,000 build-to-rent units in the pipeline.
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