Renting To Overtake Home Ownership By 2025
According to a new prediction from the professional services network – Price Waterhouse Cooper, (PwC), the number of tenants in rented properties will outnumber the overall number of property owners with mortgages in less than a decade.
The change in trend towards our that of our European counter-parts way of living is mainly due to a lack of property supply to market and tighter mortgage affordability criteria, according to PwC predictions published in its latest UK Economic Outlook report.
The report estimates that a quarter of the UK’s population will be renting properties in the private rental sector by 2025, increasing the number of rental households to approximately 7.2 million and half of those tenants will be under 40 years of age, whilst the proportion of home owners is expected to decline from a peak of 70% in the mid-2000’s to just 60% by 2025.
As property prices continue to climb, PwC estimate that property prices will continue to increase by around 5% per year, meaning that a typical average property will reach an approximate value of around £360,000 (GBP) within five years.
Senior economist at PwC, Richard Snook, said: “Driven by a decade of soaring house prices pre-crisis and lower loan-to-value ratios post-crisis, the deposits needed by first time buyers have risen significantly. As a result, a generation of private renters have emerged and this will increasingly be the norm for the 20-39 age group. There is also a rising dichotomy in the market between those (mostly older) households who own outright and those (mostly younger) households who still have a mortgage or rent to pay. More people are set to own their homes without a mortgage, as the report said almost 35% of homeowners will do so by 2025.”
Mr Snook’s comments were echoed by his colleague, John Hawksworth who is the chief economist at PwC, who added: “In the long run, a large and sustained increase in affordable housing supply will be required to meet the needs of a UK population that is growing relatively rapidly by European standards. This could involve a range of measures including further planning reform, action to address skills shortages in the house building sector and enhanced financial incentives to build more homes. But cuts to social rents announced in the budget will tend to work against this for local authorities and housing associations, while private developers may be cautious about expanding too rapidly. So we expect housing supply shortages to persist for at least the next decade and realistically expect to see a continuing rise in Generation Rent until at least 2025.”
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