Home ownership decline "not a crisis" says LIV chief executive
EARLIER this month it emerged that home ownership was at its lowest levels in 30 years.
West Yorkshire, Manchester, and metropolitan areas of the West Midlands saw the biggest, double-digit falls in home ownership numbers, with analysts saying that a growing gap between wages and property prices is to blame.
But Graham Bates, chief executive of LIV Group, the Leeds-based PRS operator, said this was in part down to a growing desire from more people to rent with the build-to-rent sector set to explode in the next 5 years.
“This is not a crisis,” he said. “Lifestyles are more transient and careers change more frequently so renting works better for this generation.”
He said it was “unrealistic” for many to consider home ownership – considering that the average house price now is around £150,000, up from £30,000 in the 1980’s.
The Resolution Foundation found that home ownership levels had sunk since 2003, when 71% of households owned their home, to 64% of households who own their home in the UK.
Mr Bates said people choose to rent for reasons other than affordability, such as flexibility and better accommodation that they could afford to buy, and that the fall in percentage ownership could be attributed to transient residents not looking to buy at all.
“People are still aspirational and want eventually to buy a home, but for most people it is a lot further off than it once was with first-time buyers increasingly well into their thirties. Banks and other lenders have tightened their criteria, you have to go through a lot of hurdles to borrow in a way you wouldn’t have to 10 years ago,” he said.
“The institutional market is still confidently saying they will pile big money into PRS.” Mr Bates said that there was around £50bn allocated for the build to rent sector with both UK and overseas funds wanting a stake in what is now seen as a compelling investment opportunity.
AIG the major US group, advised by LIV, is launching its first major 322-unit PRS scheme in Leeds this September and Moda Living’s Angel Gardens in Manchester is about to start onsite delivering 466 apartments of exceptional quality. Mr Bates said that this new wave of development will be setting a new standard of private rented accommodation with professional onsite management, amenities and design not previously seen in typical ‘buy-to-let’ properties.
“At one time, it was all social renters. But 25% of rented accommodation will be in private rented tenure within next four years. We’re already at the tipping point and with this trend set to continue, it is easy to see why institutional investors are looking to invest heavily into the build to rent sector.”
LIV Group is advising both developers and institutional investors on creating PRS schemes that will deliver a new way of renting and Mr Bates forecasts that within Leeds city centre alone there will be 5000 new units available to rent within the next 5-7 years.
This has had a knock-on effect with the housing sector, Mr Bates said. With government housing targets verging on unrealistic, the pressure is on for developers and construction companies to deliver.
Mr Bates said: “Pre-2008 developers relied on selling every unit. If you built 200 flats, you would have to find buyers for every one. It’s much harder to finance that type of speculative development today, but build to rent provides a secure exit for the developer although location and quality of construction are key.”
Build -to-rent is going to be a big contributor towards meeting government housing targets, said Mr Bates.
“It may be rental focused but it is still creating homes that will provide long-term security because tenants will be able to choose to rent for as long as they wish. The rental product doesn’t just mean apartments, there will be housing for PRS – it will be a huge contributor.”
“Build-to-rent is one of the most compelling investment stories of our time,” he said.