Overview of the UK’s Private Rented Sector (PRS) Growth

Recent research by a leading rental platform reveals that the UK’s Private Rented Sector homes could reach a whopping five million by 2025. The sector has already registered an impressive growth of 20 percent in the past ten years. PRS-acquired homes in the UK have increased by 18.8 percent in the last 10 years, from 4.1 million homes to 4.9 million.

PRS Growth in Deprived Areas: A Regional Shift

The Office for National Statistics figures reveal that the PRS growth was the highest in some of the most deprived areas in the country. The study shows an increase in privately rented households living in 10 percent of the most deprived areas of England and Wales between 2011 and 2021. It shows that 23 percent of households in the poorest 10 percent of the country rent their home privately, up from 18 percent a decade ago.

Regional Differences in PRS Growth Across the UK

On a regional level, the fastest growth for the same period has been seen in the South West. Here, the PRS stock level has swelled by over 31 percent. The West Midlands market has grown by over 25 percent, and the London market has increased by nearly 22 percent. In the North East, the number of PRS homes is more than 17 percent higher than what it was a decade ago.

Future Projections for PRS Growth by 2025

By considering data from these historic growth trends, Ocasa has put out figures of how the UK’s Private Rented Sector will perform in the future. By considering England’s growth rate at 18.8 percent over a period of 10 years, it is estimated that between now and 2025, the home stock could increase by around 6.4 percent. Those figures translate into 313,900 more homes. From a regional perspective, more new homes are expected to be added to the privately rented sector in London, the South East, and the North West. The smallest increase in privately rented homes is expected to come from the North East.

The Impact of Government Policies on PRS Investment

Many real estate experts believe that the government is trying to stifle the growth of the Private Rented Sector by making it less lucrative to purchase buy-to-let or other homes for investment purposes. Tax incentives are seen as a practical solution to the problem, as they can trigger demand and give the market the resurgence it needs. Despite these challenges, the market for rented homes in the UK is growing as not everyone can afford to buy their own home.

Current Rental Trends: Tenant Struggles and Market Predictions

2022 proved to be a hugely positive year for rental growth, with the market registering record-breaking figures. However, home rents have not kept pace with wider inflation and the rising costs incurred by landlords. Tenants are battling the ever-climbing cost of living, while rental growth seems to have settled and has been hovering around the seven percent mark for many months. Market observers expect the growth rate to slow down a little more in the coming months, with home rents projected to rise by around five percent in 2023 due to the lack of quality homes available to rent. Meanwhile, landlords are also facing inflationary pressures.