UK’s obsession with homeownership may be waning as more people choose to rent for the long.
Our generations-old obsession with home-ownership may be waning
The Housing Act of 1988 allowed landlords to regain possession of their property, leading to a rise in ‘buy to let’ purchases. This created a new market for investing in residential property, with many seeing it as a way to supplement retirement income or make a quick profit. The trend continued to grow through 90’s until the global financial crisis in 2007, which halted the rapid price growth in the market.
Approximately 1.7 million buy-to-let loans were advanced between 2000 and 2015.
UK Private Rented Sector
In 2012, Lord Montague was commissioned to write a report exploring the factors which were preventing institutional investors from entering the UK Private Rented Sector.
The report set out a series of clear recommendations, the most impactful of which may well have been the proposal to establish a ‘PRS’ task force which set out, with full Government support, to break down barriers and drive the shift to a more regulated and higher quality rental sector. The rest, as they say, is history- the structural shift towards renting was underway.
The single family rental (SFR) model is starting to attract significant investment for houses for rent
following the success of the Build-to-Rent (BTR) multi-family sector. It is predicted that the SFR sector could outperform the BTR sector in terms of investment as the housing industry faces challenges such as the end of Help to Buy, interest rate rises and high inflation. As a result, institutions are stepping in to fill the likely gap between supply and demand in the rental market.
Obsession with owning a home
The obsession with home ownership has been driven by three factors: the association of ownership with social credibility, the desire for security, and the pursuit of equity. However, as more people choose to rent and higher quality rental options become available, sentiments are changing. With the average age of first time buyers rising and more people renting for longer, there is a shift towards renting being a socially acceptable option for the medium to long term. The stigma surrounding renting is fading.
Traditional tenancies generally last for a year
The institutional residential approach is founded on longer stays of up to 5 years, challenging the idea that renting is synonymous with transience. Our fixation with owning property to accumulate wealth is also being challenged, with the understanding that the equity accrued can only be accessed through equity release or downsizing, both of which involve further investment. Additionally, many homeowners never sell, leaving their property behind and creating a tax liability, rendering the wealth accumulated through homeownership unrealized.
Reasons why renting could be better than buying – https://www.investopedia.com/financial-edge/1112/reasons-renting-is-better-than-buying.aspx
It is ok to rent long term
Renting is undoubtedly becoming more socially acceptable and longer term tenancies in institutionally owned properties are increasingly accessible but if future generations are to properly embrace rentals for the long term and potentially for a lifetime, we will need to move away from viewing our home as an investment.
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