This does not mean that housebuilders are not trying to meet the demand for owner-occupier homes. According to a survey of more than 400 housebuilding companies in England carried out for McBains, a construction consultancy and design firm, more than half of housebuilders have increased the rate at which they are building new homes in the last year. Many predict a further rise over the next 12 months.
On average, housebuilders said that the expected an increase of 48% in the next year, but even this remarkable growth gets nowhere near meeting the government’s target of 300,000 homes a year.
Respondents cited the availability of land (55%), the slow planning permission process (49%) and a shortage of skills (47%) as the main factors affecting how many homes they can build in the future. Just under half (48%) of respondents believe that the government targets are achievable by the mid-2020s.
It is clear that extraordinary measures would be required to meet the target and, consequently, the rental market is seen as the long-term future of housing for many. Developers are responding to this and building more rental homes to serve this new market.
CBRE’s UK Residential Investment MarketView Report from Q4 2018 backs this up, showing that a total of £3.1bn was invested in the PRS in 2018, an increase of 33% over 2017, with £906.6m of that coming in the final quarter of the year. In addition, there was another £820.5m worth of deals in the pipeline at the time of publication.
When looked at in terms of houses, this equates to 7,650 additional private rented homes either completed or in the pipeline since Q3 2018 – a serious amount of extra homes.
In an environment where the McBains research confirms that only one in five of new homes built is classed as “affordable”, the growth of the PRS is essential. If people cannot afford to purchase a home they will continue to rent, and more people are entering the market every year. This does not even include the many people who choose to rent in the long-term because it suits their lifestyle.
Even with housebuilders in England increasing the pace of development, it is clear that they are a long way off reaching the government’s targets. Without something major changing – a combination of planning reform, land release and massive funding – it is likely that the PRS will continue to be the preferred destination for developers and investors.
Are you looking for your next UK buy to let property? Why not have a look at our latest development, Cannon Street!