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UK Private Rental
The private rental sector is large and rapidly growing and delivers investment returns which outperform other asset classes over 5 to 20 years, with the exception of 5 year gilts.
The market is growing rapidly as the UK moves towards a higher proportion of total housing stock being in the private rental sector.
Asset management in the UK market remains highly fragmented with over 15,000 agents operating in the UK market.
UK Residential
The UK residential market is the largest asset class in the UK
- Owner occupied stock – £3,546bn
- Private Rental Sector – £893bn
- Social Housing stock – £560bn
UK Private Rental Sector – The UK Private Rental Sector (“PRS”) is now a significant asset class (£893bn) and has grown significantly over the last 5 years and further significant growth is forecast over the next 5 years
The percentage of UK total housing stock that the private rental sector represents is till significantly lower than more developed private rental markets, in particular in the US and Europe.
Historic Investment Returns
Over various periods UK residential assets outperform all asset classes with the exception of 5 year gilts.
Market Drivers
Significant growth has been achieved over the last 5 years in the UK Private Rental Sector and this is forecast to continue due to the significant structural shift in the UK Residential Market
Key growth drivers – There are two key growth drivers in relation to the UK Private Rental Sector, namely:
- UK Housing gap – Over the next 20 years there is a demand for an extra 300,000 residential units per annum, which is in addition to the current shortfall on housing within the UK of 2 million homes
- Owner occupied / Social Housing – Owner occupation in the UK increased significantly from the 70’s but this trend has started to reverse over the last 10 years. In addition, the level of social housing within the UK is falling, due to the lack of availability of funds to invest in social housing.
Shift towards the PRS – The drivers which have resulted in growth in the Private Rental Sector over the last 5 to 10 years will continue to stimulate further growth in the Private Rental Sector as follows:-
- High level of deposits for mortgages
- Student debt
- Longevity
- Government support (>£50bn)
Generation of Renters – a significant shift has occurred in the UK Market in the number of 16 to 34 year olds opting to own rather than rent accommodation – in 1991 more than 60% of 16 to 34 year olds owned their own property and by 2011 the number owning their own property had fallen to 35%
Property Management
UK Property Management remains highly fragmented with a large number of relatively small business. The total number of agents in the UK is approximately 15,000 with all of the key private rental markets in the UK comprising of a significant number of agents as seen in all of Lomond’s existing markets.
| Region | Number of Agents |
|---|---|
| Edinburgh | 174 |
| Aberdeen | 32 |
| Manchester | 411 |
| Birmingham | 431 |
| Brighton | |
| Leeds | 154 |
Key Drivers of Consolidation
UK Property Management market is consolidating under a number of larger businesses which deliver national coverage and a broader range of services to Private and Institutional Investors. There are a number of key drivers of the consolidation being seen in the UK Market.
Profile of landlords – Current market is dominated by private landlords (95% of the market relates to private investors with less than 5 properties) but introduction of larger / more professional private landlords, funds and institutional investors will place pressure on small business
Competition – New entrants are focused on delivering a broader business model offering a more comprehensive offer based on US and European models will place pressure on traditional models
Margin Pressure – Larger business with more comprehensive models will place pressure on small sub-scale business which do not deliver good value
Regulation – Increasing regulation both of landlords and agents
Consolidators – a number of larger businesses are currently acting as consolidators in the UK Market and will continue in the short term until they obtain the required market share in target regions
Property Management
UK Property Management remains highly fragmented with a large number of relatively small business. The total number of agents in the UK is approximately 15,000 with all of the key private rental markets in the UK comprising of a significant number of agents as seen in all of Lomond’s existing markets.
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Key Drivers of Consolidation
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7
Years in business
14
Top professionals
5
Industry awards
90
+
Projects done
40
+
Returning customers
27
Scientific articles
Market Drivers
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7
Years in business
14
Top professionals
5
Industry awards
90
+
Projects done
40
+
Returning customers
27
Scientific articles