The UK has seen the number of rental households grow by one million since 2009, as renting increasingly becomes the tenure of choice for residents. Around 3.9 million households now rent in England and Wales, according to a new report from agents CBRE.
To date, the growth in the supply of rented homes has been facilitated by buy to let investors, and owners from overseas, note the agents, with little interest shown on the part of institutional investors. Most of those foreign buyers have been focused on the greater London area, or on established rental markets in major towns such as those which provide homes for workers commuting into London.
As existing stock becomes harder to obtain, investors are turning their attentions to other parts of the UK, say CBRE, prepared to consider diversifying risk by buying to let in other locations around the country.
A combination of tough times for those in work, with many people not getting automatic inflation-linked pay rises; and a growth in demand from those buying properties for rent; has meant capital growth has beaten rental growth in all regions during the last year. The resulting yield compression is likely to continue through 2014, suggest CBRE, despite more new build housing being delivered to the market.
“The robust performance of the private rental market in London, which continues to witness the strongest growth, has mostly been supported by employment growth in the business and financial sectors, affordability constraints and a lack of available mortgage products on the market,” said Jennet Siebrits, head of residential research at CBRE.
“While residential rents in regional areas across the UK have not yet experienced rental prices in line with those of the capital, CBRE now expects higher rental value growth to permeate out to many of the regional towns and cities.”