Spotlight on Investing in Rental Britain takes an in-depth look at Britain's rental market and also features an exclusive survey 'What Tenants Want'. Download here.

• Affordability constraints remain

The improving economy, strengthening housing market and Government policies promoting homeownership will not stop the private rented sector from growing. Despite all these factors as well as improving credit conditions, affordability constraints mean that many will continue to rent for longer. Savills Research expects the private rented sector to grow by 200,000 households per year over the medium term.

• Urban phenomenon

The greatest demand for rental homes will continue to be found in city centres. In some London boroughs over 40% of households rent privately. Cities such as Manchester, Brighton and Oxford have a particularly high concentration of people renting homes. As our Savills/YouGov survey confirms on page 6, proximity to work and public transport are two of the most important factors when choosing a rental home.

• Not just for the young

Renting no longer applies solely to young people. Census data show that under 35s make up 45% of the PRS. But a third of those renting are aged between 35 and 49, including many families, and this age group has being growing at the fastest rate. Growing concentrations of people renting privately in urban centres means that much of the social stigma associated with renting is fading and that there is growing demand for single family units as well as apartments.

• Rents will continue to rise

The cost of renting is a key consideration for private tenants, according to our Savills/YouGov survey. Yet while there is a mismatch between supply and demand rents will continue to rise. We forecast that rents in the mainstream markets will rise by 18.2% by the end of 2017. In Greater London we expects rents to increase by 26.4% over the same period.

• More stock needed

Institutional investors are poised to inject £7 billion into the private rented sector according to the PRS Taskforce. However, a lack of product remains the biggest constraint to investment. Access to large residential portfolios of appropriate quality stock remains a significant barrier to major institutions looking to seed dedicated UK residential funds.

• PRS is still fragmented

Savills own investment database shows that £1.36 billion traded in the investment market this year up to the end of Q3. Whilst this is an increase on last year, it remains a small fraction of the £893 billion tied up in the private rented sector, which is mostly in the hands of individual buyto- let investors.

• Flexibility is key

So far the Government has resisted calls to promote build to rent through a distinct Planning Use Class. We believe it is right to do so. While the introduction of a Use Class may help to deliver some new stock, long term it would depress value and investment returns.

There is enough flexibility within the NPPF to allow build to rent to flourish but Local Planning Authorities must be open to negotiations regarding Section 106 requirements. Although this was a key recommendation by Montague, there is little evidence that this is happening in any meaningful way.

Taken from
Spotlight: Investing in Rental Britain