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Renting could be a permanent choice for next generation

Graduate debt and the need for huge deposits may lead to a culture change, which will put the focus on B2L

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Graham Felstead Head of intermediary channel Natwest Intermediary Solutions

You are probably familiar with the phrase ’May you live in interesting times’, which is believed to be a Chinese curse and was popularised in 1966 by Robert F Kennedy in his Day of Affirmation address in South Africa.

Whether a curse or not, it is certainly true that we have been living in interesting times. And interesting is also a good word to describe the prospects for the buy-to-let market.

Recent statistics by the Council of Mortgage Lenders showed that buy-to-let lending rose by 12% in in Q3.

Not only was this the second consecutive quarter to show an increase but it was up 33% in value and 14% in volume on the corresponding quarter in 2009.
Admittedly, this growth is from a low level, the likes of which we haven’t seen since 2002.

But if you consider some of the other factors that will influence the prospects for the sector, there is a good argument for optimism.

Take would-be first-time buyers. Recent government announcements on the proposed increase in university fees could have a considerable impact on graduates’ ability to buy their first property even if they club together to do so.

Saddled with even more debt than today’s students have when they leave university and land their first jobs, they are less likely to be in a position to buy a house for a number of years after graduating.

But it’s not just graduates who face challenges. It has got increasingly difficult for people in their 20s and indeed 30s to raise a large enough deposit to buy a house or be able to secure the loan they need to buy a place in their preferred location.

It’s too early to say whether the UK will shift to a European model but we live in interesting times

Many now think of renting as a more permanent housing solution. Renting gives them the opportunity to live where they want to and the flexibility to go off and do a spot of travelling if they wish.

If you take into consideration these factors and how they will mould young people’s expectations, we could see a culture established in the younger generation where renting becomes the accepted norm and home ownership is no longer the default aspiration.

Such a culture change would create greater demand for rental properties.

And to add to the melting pot, the government’s recent announcement that new council and housing association tenants will be offered fixed term tenancies rather than life tenure may also contribute to even more demand for private rental.

Expectations of rent rises are already being voiced by tenants. A recent survey by Rightmove showed that over 40% of tenants said they expected rates to be higher in 12 months’ time.

So on the surface it looks like there could be a healthy flow of demand for rented accommodation.

Capital Economics has forecast that 17% of households will live in privately rented accommodation by 2015, compared with 14% at the moment.

Whether the UK shifts more towards a more European model of housing is too early to say but we live in interesting times.

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