The private rental sector is in slow retreat according to a new analysis by Nationwide-owned specialist lender, The Mortgage Works.
Nationwide chief economist Robert Gardner, author of a new market snapshot for TMW, says that after almost two decades of rapid expansion, the sector in England staged a modest retreat in the three years before the pandemic.
What he is uncertain about is whether those recent years, compounded by the uncertainty of Covid-19 for the past 15 months, are a temporary fall-back or a long-term retreat.
“The share of households in the PRS in England edged down for the third year in a row in 2020, to 18.7 per cent from 19.3 per cent in 2019 and 20.3 per cent in 2017. The number of households in the PRS fell to 4.4m from 4.7m in 2017” he says.
This represented a significant shift after almost two decades of robust growth. Indeed, the proportion of English households in the PRS rose from 10 to 20 per cent between 2000 and 2017.
In the same period the absolute number of households in the PRS more than doubled, from 2m to 4.4m - more than twice the rise in the number of owner occupiers, which increased by one million over the same period.
Gardner continues: “The shift reflects a combination of factors. Increased regulation, political uncertainty and tax changes (including the introduction of higher stamp duty rates on the purchase of additional properties from 2016 and a phased reduction to the tax deductibility of landlord expenses from 2017) dampened investor demand in the PRS.
“There was a 12 per cent reduction in the number of rental properties owned outright between 2017 and 2020 and, while the number owned with a mortgage continued to increase, the rate of growth slowed from eight per cent in 2014/15 to two per cent per annum. over the 2017-2020 period.
“At the same time, there was a commensurate rise in first time buyers, buoyed by robust labour market conditions, low mortgage rates and increased availability of higher loan to value mortgages (alongside the ongoing support from the Help to Buy scheme), helping those with smaller deposits - the main barrier for most first-time buyers - to buy a home.”
Gardner says the impact of the pandemic has been profound but not like previous major economic shocks - mostly because there has been such a concerted government response to aid the economy. At the same time, individual renters reassessed their housing priorities.
“Interestingly, looking across tenure types, those in the PRS were most likely to be moving or considering a move, at 40 per cent of those surveyed, compared with 32 per cent of those owning their home with a mortgage and 20 per cent of those who owned their home outright.”
He continues: “Within the PRS, the desire to move as a result of the pandemic was prevalent across most regions, but was particularly marked in London, where over half of tenants were moving or considering a move.
“Amongst those in the PRS either moving or considering a move, a desire for move to a different area was a key motivating factor, with around a third of respondents citing this. The majority were looking to move to a less urban environment, with nearly 60 per cent looking to move to a smaller town or city or a village/rural location, compared to 16 per cent moving to a larger town or city (where the remainder were unsure or looking to a similar sized settlement).”
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