Why changing attitudes to home ownership are good for UK property investors

Contributed by Select Property Group, 30 July, 2015

As Britain increasingly moves away from being a nation of homeowners, here's what investors need to know to capitalise on changing attitudes to property.

For generations of Britons, home ownership been a long-held aspiration that's represented one of life's main goals.

But times they are a changing. Not only is renting on the rise, but there is a growing preference to rent over buying property. In fact, the growth has been so pronounced, that recent estimates suggest that over half of 20-39 year olds in the UK will be renting property over owning it by 2025.

So what's caused this shift in attitudes? And why is it UK property investors that could benefit the most from this emerging trend?

The need for transiency

Of course, Britain's huge house price growth in recent years has been good news for some, but less so for others. For investors, it's meant strong levels of capital appreciation, but for first-time buyers looking to break into the owner-occupied sector, it's meant a barrier to entry. This has meant a rise in so called 'trapped renters' – those that reluctantly rent in order to save for a deposit on a mortgage.

However, the popularity of renting has also been driven by people making a conscious decision to live in property in the private rented sector (PRS) as opposed to owning their own home.

This is because the UK's labour workforce is distinctly more mobile than it was even just 20 years ago. Today more than 75% of British workers are prepared to relocate cities for the benefit of their careers, whilst 25% of 16-34 year olds aim to have 12 jobs in their career. For these people, being tied down to a property and mortgage would restrict this movement, and it's for this reason why renting has become the preferred option.

Furthermore, sustained economic investment in a number of areas has given rise to a number of sub-groups in the PRS such as the city-centre tenant, an affluent business executive that stays in one city for a relatively short period of time. As a result, there's been a sharp rise specifically in short-term lets, with these tenants preferring the greater affordability when compared to accommodation types such as hotels.

Now is a good time to invest in the UK – but where?

This generational shift has helped to drive returns for UK property investors, and it looks set to continue to do so in the coming years.

Crucially, housing stock levels in Britain are at record lows. This means that while demand is high, supply is low, consequently pushing up rents and driving returns for investors.

So which cities are currently the best places to capitalise on these changing attitudes towards property?

Manchester is the HSBC's number one buy-to-let hotspot, with rental rates growing 13 times faster than London in recent years. A thriving economy and transport links has increased short-term tenant numbers, putting pressure on the local market. Crucially, however, with Manchester set to benefit from £7 billion worth of investment under the UK government's Northern Powerhouse plans, the best time to investment in the north-west is now.

Other cities include Glasgow, named recently by the Daily Telegraph as the best city for young renters in the UK. Rents increased in Scotland's largest city by 11.1% between 2010 and 2014, and investors can expect continued growth as a result of ongoing economic investment, including the £1 billion City Deals Agreement which is set to create tens of thousands of jobs in Glasgow over the next 20 years.

Tags: business | Other | investment | Scotland | United Kingdom |



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