With an ever-growing need for property, renting in the UK has become go-to game for many home seekers who can’t quite make it into the mortgage market. But what does this mean for the letting side of property? Fareed Nabir, CEO of PropTech platform LetBritain discusses for Finance Monthly.
Over recent weeks we have seen the UK’s two largest political forces host their party conferences. Along with inevitable, frequent mentions of Brexit and a fair amount of scrutiny for both the Labour and Conservative leaders, it also became clear that access to housing is at the top of Westminster’s agenda at present. In this respect, the private rental sector faces particular challenges in providing homes for a growing proportion of the country’s rising population. With the UK population projected to reach 70 million people by mid-2027, PWC estimates that an additional 1.8 million households will enter the UK’s private rental sector over the next eight years.
Central to the growing importance of the private lettings sector is the rising costs associated with purchasing a home. The average value of properties in London has risen by a whopping 78% in the ten years since the onset of the 2007 global financial crisis. Add to this further figures around rising prices for Manchester, the East Midlands and Scotland and a clear picture emerges. Whilst the UK property market may be a fruitful asset class for many investors, more and more UK residents are now coming to rely on the private rental sector as the bottom of the ladder rises out of their reach.
Recognising the value of renting
Reacting to the rising number of people moving out of homeownership, leading political figures have focused on addressing feelings of insecurity expressed by voters. Both the Conservative and Labour parties share a target of building one million new homes by the end of the parliament and are considering the possibility for longer tenancies to become the norm. Labour has taken this one step further and has embraced a policy pursued in cities including Berlin, Stockholm and New York, whereby the government intervenes in various ways to restrict rents.
However, we must also remember that for many people, renting is an extremely attractive option. One of the most attractive aspects of renting is the greater flexibility offered by tenancies relative to ownership. For example, if you have to move to a new city for work, it’s nowhere near as difficult as having to list a property and wait for a sale to be processed. With the UK workforce now more globally and nationally mobile than ever before, we must remember the historic advantages of renting if we are to effectively adapt. The reasons that made renting an attractive option in the past haven’t gone away; in fact they are now truer for more people than ever.
To this end, the emergence of a rising number of tech platforms within the property sector holds significant promise. A property market that was once dependent on bricks and mortar agencies, endless reams of paperwork, lengthy phone calls and poor transparency is fast becoming more efficient; as a result both landlords and tenants are coming to expect more. It’s now possible to begin the process of securing a rental property from anywhere in the world and engage directly with a landlord or their instructed letting agent.
In short, tech has meant that the process of letting a property can be made quicker, cheaper and more transparent for all involved. Commonplace in other aspects of people professional and personal lives, people in the UK today expect tech – everything from bespoke software and apps to slick online platforms and web support – to make hitherto laborious processes far, far easier.
Delivering choice and security
Recent LetBritain research into this emerging development found that 31% of UK adults, the equivalent of 15.92 million people, now think that using high street letting agents to rent out a property is outdated and overburdened by paperwork. A further 25% were found to be relying upon unregulated online-only alternatives to source and secure a rental property. Whilst a number of challenges remain in managing this transition, the scale of public sentiment is resoundingly favourable towards harnessing the power of tech to more conveniently and efficiently facilitate property rentals.
The challenge remains for the sector to deliver choice and security across the letting market. Landlords should not feel the need to put their property at risk by renting to an unreferenced tenant just because they were sourced online, and tenants deserve to know that their legal rights will be observed. If this is achieved, the private rental sector should be able to manage the demand that it’s set to face in the years ahead, with landlords and tenants alike incentivised to be communicative, transparent and forthcoming with all necessary documentation.
As more of us move around or find it difficult to buy in our desired location, digital solutions that enhance and protect the interests of landlords and renters are vital. So while political leaders are focusing heavily on turning Generation Rent into Generation Buy, it is equally important that they promote more progressive approaches for serving all those in the rental market.