Skip to main content

Completely London

London property market blog


/ by Paul Masters

The growth of the private rented sector in London

While homeownership is something that most of us aspire to, there are signs that in London (and elsewhere in the UK) we are beginning to follow parts of Europe and move to longer term renting, but this move is not necessarily from choice. More people are now renting for much longer periods, and there is a growing feeling that a generation of renters may never be able to afford to buy their own homes, so much so that they have been dubbed ‘Generation Rent’.

In London, 25% of all homes are privately rented, while the same number is let by social landlords. The Government estimates that the figure for privately rented household numbers could rise by a further 15%, in just 10 years’ time.

This increase in demand for longer term rented accommodation has resulted in shortages of homes to rent and significant increases in rents in recent years. In fact, the KFH lettings arm of our business has seen rents in London increase by nearly 25% since 2009.

The growing trend towards private renting has been driven by the high cost of homeownership in London and restrictions on mortgage lending during the recession, although renting does give people flexibility over where they live. Overall, this has led to more people renting property for longer periods, and at KFH our average tenancy is now 16 months. The shortage of good quality stock available to rent has not been helped by the lack of funding for buy-to-let landlords during the recession. That situation is easing now and will improve supply, but demand is still high.

For the last 20 years or so, the private rented sector (PRS) in London has been dominated by buy to let landlords with small portfolios of properties. This has served the market well and a lot of new build apartments in London aimed at first time buyers have been bought by small private investors. Yields are generally good, compared with other investments, and many investors have seen the value of their portfolios increase substantially.

But the PRS landscape is set to change. Institutional investors are eyeing the sector seriously and the former athletes’ village at the Olympic park in Stratford is one of the first examples of a large scale institutionally-backed PRS scheme. East Village (as it’s now called), will offer 2,800 high quality apartments and houses available for long term rental, with nearly 50% available as affordable homes.

The Government’s recently launched £1bn Build to Rent fund and £6.5bn of loan guarantees are designed to encourage the provision of quality long term privately rented homes. The first Build to Rent contract in London has been signed and will see the Elephant & Castle shopping centre in south east London demolished and replaced with a residential-led development of homes to rent.

In the social sector, housing associations are having to deal with changes in government funding and in order to maintain the much needed supply of social housing in London, they are moving into open market rentals to provide additional revenue streams.
Not only will these changes increase the supply of homes to the PRS but the new breed of corporate and institutional landlords will provide high quality accommodation and high levels of customer service to attract and retain long-term tenants and minimise unwanted void periods.

So, while we seem to be moving towards a generation of renters, there will be a wider choice of quality homes available to them.

About our expert View all posts by this expert

Expert Paul Masters
Paul Masters Group Operations Director at KFH

Paul joined KFH in 2001 as marketing director and was appointed to the main board in 2002. He is now responsible for group support services, together with the block management and conveyancing businesses. With more than 25 years' experience in residential property, Paul has a wealth of experience across this sector and also sits on the board of Agents' Mutual, the property portal that launched in 2015. In his spare time, Paul enjoys cycling, architecture and travel.

Read more testimonials Leave a review