Back in August we officially learnt that the number of private renters had surpassed the number in social housing for the first time. This represented a substantial shift in the way that Britain was housed, confirming to us that ‘Generation Rent’ had arrived.
What’s causing ‘Generation Rent’?
Alongside increasing demand for rental properties and a change in lifestyle, tougher mortgage regulations have fuelled the rise of ‘Generation Rent’, making renting a much easier option. More stringent lending criteria since the financial crash in 2008 mean that it’s become harder for first time buyers to get a mortgage and take that first step onto the property ladder.
Between 2001 and August 2014, the private rental sector in England saw an increase in the number of homes (89.5%) this is an increase from 1.9 million homes to 3.6 million homes; with the ‘Generation Rent’ influx meaning that over 10 million people now live in a rental property. But is ‘Generation Rent’ here to stay?
Who are ‘Generation Rent’?
With the average age of a first time home buyer now standing at 37, ‘Generation Rent’ is generally associated with those born after 1980, although the large increase in the number of people renting is not solely down to this group.
The exact make-up of ‘Generation Rent’ changes by location. For example, in Northern Ireland, the average age of a tenant is only 31, whereas this number rises to 35 in South East England, a number that would place the average tenant outside of ‘Generation Rent’. Such regional differences show us that the housing market is variable across the country, and that it may be easier for buyers to get on the market in some areas, as opposed to others.
Although tenants tend to move home more often than home owners, this doesn’t mean that they’re not valued by their landlords. Looking at the issue in practical terms, our Rental Index shows that the average previous tenancy length for 18-21 year olds is 13.8 months, and this group is generally considered as the most transient as it includes students. At the other end of the spectrum, the greatest permanence is seen in the 56-65 year old population, where terms of 31.9 months are average.
The lures of renting for ‘Generation Rent’
So, why does ‘Generation Rent’ exist? One of the drivers of the growth in rental rates is the flexibility that renting provides. For young professionals, students and entrepreneurs, renting gives them a greater degree of flexibility, allowing for a sudden change in circumstances such as the end of a degree, a new career or a new business opportunity which it would be harder to pursue if they owned a home.
Due to the demand for rental properties, the UK’s becoming much more like its European counterparts such as Germany, where renting is the norm. The figures also suggest this. The latest release by Eurostat (the EU’s official statistics bureau) shows that UK home ownership rates were almost identical to France’s in 2013, while still staying considerably above the levels in Germany. 2014 could be the first time British levels fell below French ownership levels since Eurostat started compiling figures in 1995. In spite of this, Britain’s home ownership rate is nowhere near the level of Germany’s, where only around 52% of the population own their own homes, and Switzerland, where only 44% own their own homes.
So, due to a rise in demand for rental properties fuelled by many factors including changes in living circumstances and mortgages being harder to acquire for first time buyers, it looks as though ‘Generation Rent’ is here to stay for the foreseeable future.
All statistics correct as of 15/01/2015
All data from the HomeLet Rental Index unless otherwise stated.
Image courtesy of Shutterstock.