UK's Private Rental Sector expected to grow
13/01/10 21:29 Filed in: UK | Real Estate
I read an article in the Financial Times (FT) focused on the UK housing trends. A link to the full article is at the end. You might need to register or be a paid up member of the FT.com site to access the article.
What I somewhat fail to understand it why they think the Private Rental Sector (PRS) is such a riddle. Housing in the UK is limited, the planning process is long before permission to build can be obtained and close to everyone who wants to buy already can do so if they have the financial resources. The market shows 68.3% of the housing market is already owner occupied. While the article points out this is down from 71% in 2003, there is a level at which the market is saturated. People who lack permanent employment, people who need to move a lot, students, people setting up as a family or breaking up all tend to need a more temporary housing solution compared to folks who want to ‘put down roots’ for a rather long time.
If we strip out the groups who do not fit the profile of an owner (students, those on state support and other such groups) 65% to 70% might be all that can be achieved in terms of ownership.
So, where do the people who want to rent go to live? Clearly the state should not be providing housing for people who have the means to secure their own accommodation. What is needed is a PRS that can cater to a range of needs while operating professionally and to a certain standard as mandated by law (landlord-tenant acts set out the rules).
Let’s look at a few selected comments from the FT article.
“The coming decade is expected to bring a growing demand for rented accommodation as people find it increasingly difficult to get on to the housing ladder. The proportion of owner-occupied homes in England has fallen from 71 per cent in 2003 to 68.3 per cent today, according to the Department for Communities and Local Government’s Survey of English Housing.”
“He said the UK is likely to move to a more European model of housing where renting will be a more common option.”
The US has a similar level of owner occupancy as the UK. Maybe the UK will evolve towards the European model of maybe it will remain as it is. It should be noted that prior to WWII the UK was showing approximately 49% owned their own home with the state picking up a lot of the balance. In other words there is no birth right to be an owner of you home in the UK. It is a rather recent idea that seems to have caught on rather than something buried deep in the UK psyche.
I did find the next comment rather interesting. It looks like the level of total debt secured by housing is going down, at least in the owner occupied slice of the housing pie.
“While the number of mortgage slaves has dwindled, the figure for older householders paying off their mortgages has increased. The number of people owning outright, without any mortgage, rose by 1m in the years to 2008, so that now nearly half of all owner-occupiers have no mortgage.”
-John Corey
The rental riddle
By Tanya Powley
Published: January 8 2010 23:15 | Last updated: January 8 2010 23:15
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