The dynamics of London's rental market are changing, according to a new report commissioned by Cluttons. Professor Michael Ball of Reading University found that almost half of the capital's population now rents property, compared to a national average of 30 per cent. In his report, "One Size Does Not Fit All: Diverse Opportunities in London's Rental Market", the academic claims there has been an 80 per cent increase in the number of private tenancies over the last decade. Most of these have taken place since 2005.
In London's rental market there is almost an equal split between private and social sector, with a quarter renting privately and 24 per cent with social housing institutions. Conversely, the number of people owning their own homes has fallen. It seems the 20 to 40 age group is driving demand for rental accommodation. This is thanks to inward migration to the capital, smaller household sizes and cost barriers to homeownership.
Sue Foxley, head of research at Cluttons, commented: "This report highlights that younger people are choosing to rent for longer periods, especially if they plan to stay in the capital only for a few years, or wish to live centrally, thus avoiding long commutes from outside London. Given the high cost of getting that first foot on the property ladder, many of them are unsurprisingly unable to commit to buying and are forced into renting."
She added that renting over a long period of time is now accepted. There is a greater number of relatively affluent couples happy to bring up children in rented accommodation, delaying getting on the housing ladder. The student population is also causing demand for rented accommodation to increase. There is a shortage of student accommodation in the city and many are turning to domestic rentals instead.
Consequently, it is no surprise that those on the search for property investment opportunities are turning their attention to London. With a constant stream of would-be tenants and high rents, it is an attractive location for buy-to-let landlords. However, yields are relatively low due to the high cost of property in the city.
- Monday 03 June 2013