Even if house prices were to remain the same as they are today, the UK’s private rented sector needs £1.4 trillion of investment to meet demand by 2035, according to a prediction by specialist buy-to-let mortgage lender Landbay.
The projection is based on the assumption that the rental market will grow at the average yearly rate since 1991 (4.4%) while house prices remain broadly static. In reality housing stock and population pressures could see higher growth rates in years to come.
If house prices did not remain static, but were to continue growing at their average rate since 1990 (+5.1% per annum), the sector would require investment of £4.0 trillion by 2035.
The private rented sector is set to more than double in size by 2035, from 4.9 million properties in 2012 to 13.2 million properties in 2035, according to Landbay’s projection.
Cumulative investment required in the PRS at different levels of annual house price growth:
| 0% house price growth | 2% house price growth | 5.1% house price growth (the average since 1990) | |
| 2015 | £42bn | £43bn | £45bn |
| 2025 | £586bn | £729bn | £1,000bn |
| 2035 | £1,400bn | £2,156bn | £4,000bn |
London and the South East account for a significant share of total cumulative investment needed. £455 billion of investment by 2035 is projected to be essential to maintain the private rental sector in the region.
John Goodall, co-founder and CEO of Landbay, said: “A substantial amount of new investment is needed to provide homes that will be needed over the next two decades, particularly if those homes are to be high quality homes that people want to live in.
“The UK’s housing stock is under significant pressure because not enough new houses are being built, the population is growing and people increasingly prefer to live in smaller, high quality dwellings. The scale of the investment needed to ensure the sufficient supply of high quality properties means that multiple solutions are needed – from build-to-let by pension funds, the government’s own ‘Build to Rent’ scheme, further housing debt guarantees from the UK government, through to continued investment by private landlords themselves and an active and vocal private rented sector taskforce.
“We are gradually moving towards a more European model of housing – where home ownership sits comfortably alongside an equally aspirational population of tenants. In countries such as Germany, where more than half the population live in private rented accommodation, this has been entirely consistent with improving living standards.
“So long as the UK can find the necessary investment and the most appropriate reforms, a growing private rental sector has many benefits. Renting offers insurance against house price corrections and greater flexibility and mobility in an evolving jobs market.”
