UK property: high house prices mean renters are getting older
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The British fondness for owning property may be long-established but new research suggests it is beginning to trail off rapidly, especially in London, where the appetite for home ownership has been curbed by ever-rising house prices.
Yolande Barnes, head of research at Savills, the agency behind the study, says: “We have come to accept the popular wisdom that ‘an Englishman’s home is his castle’ and, unlike our European cousins, we are a nation of homeowners. But it turns out that the UK is much more like Europe than we thought.”
Of all property in the UK, 62 per cent is owner-occupied, still higher than Germany at 56.2 per cent but lower than France at 63 per cent, Italy at 72.5 per cent, and the EU average at 73.5 per cent. Though falling, it is still well above US cities – research carried out in 2011 puts the rate in New York at 31.9 per cent, according to the city’s department of housing.
“The UK’s high prices mean people rent for longer,” says Susan Emmett of Savills. “Today 23 per cent of all households renting are headed by someone aged 50 and above.” In London, the increase in older renters is even more defined, with the number of people renting aged 35 and over nearly doubling in the past 10 years to become the age bracket with more renters than any other. As a result, local landlords and developers are increasingly gearing their rental stock to an older crowd, who often have higher budgets and who are likely to prioritise higher spec finishes, longer leases and proximity to schools.
One of London’s new rental developments hoping to attract more mature – or family – renters is East Village, the former athletes’ accommodation complex next to the Olympic Park in Stratford. Of the 2,818 new units, 1,439 are being privately let by Get Living London, a joint venture by Qatari Diar and Delancey. “About five to six years ago the bulk of renters were aged between 22 and 32,” says Derek Gorman, chief executive of Get Living London. “Now we’re seeing that age band expanding to 22- to 40-year-olds, making the number of renters in the market swell considerably.”
Though many Londoners still see buying as the ultimate goal, Gorman thinks the idea is slowly losing traction. “People [in London] are getting acclimatised to the idea that renting might be a long-term alternative to buying,” he says.
East Village has units with high-end furniture by British designers and craftsmen; Wayne Hemingway is overseeing the project. Families will have guaranteed access to the nearby Chobham Academy – a new state school, specialising in performing arts, which opened in September – and leases will be available for up to three years, twice as long as most London tenures. Rents stand at £310 per week for a one-bedroom apartment, up to £515 for a four-bedroom town house, with the first phase of 129 units due to be ready by the end of the month.
“We’re keen to hang on to our tenants,” says Gorman. “So they might come to us and rent a one-bed, then start a family and move into a two-bed, and then progress to a four-bed, all over a number of years. It’s not a model that’s common in the UK but it has worked in cities like New York for generations.”
Private landlords in the capital are similarly keen to adapt properties to the changing market. Knight Frank is letting a five-bedroom home on Cloncurry Street in Fulham specifically geared towards families: it has a large lawn garden and the basement has been converted into a children’s playroom. The house is available to rent for £1,800 per week.
For those with a bigger budget, Glentree is leasing a six-bedroom detached house in Kenwood, north London, for £12,000 a week. The property has an indoor pool, gym, home cinema and family room.
The rising market for rental properties in UK cities is also providing an opening for investors. Savills estimates that by 2018 one in five households will be privately rented, an increase that will necessitate an extra £200bn of funding. According to Savills, a large proportion of this money is expected to come from insurance companies and pension and investment funds (which could treat large-scale rental developments as an asset class on the lines of the commercial property they buy today).
Grainne Gilmore, head of UK residential research at Knight Frank, says such institutional investment will have an effect on the quality of lease property. This could, she says, make it a more attractive option for older renters looking for a buying alternative.
Yet with the government’s £3.5bn extension to the Help-to-Buy scheme due to take effect in January next year, are such optimistic rental market projections somewhat over-baked?
“There could be pockets of the capital, especially in the outer boroughs, where the easing in credit constraints for potential homebuyers could marginally depress demand for rental property,” says Gilmore. “But affordability will remain a key issue for many – it won’t have a detrimental effect on the rental market.”
Tim Van der Schyff, lettings director of John D Wood & Co, thinks the rise in older renters is not limited to would-be first-time buyers in their mid-to-late thirties. “Some retirees are choosing to rent a country cottage and a pied-à-terre in London so they can have the best of both worlds, and they sell their homes to do this,” he says.
After selling his house in Belsize Park, northwest London, for £1.25m, Philip Turner, an 84-year-old retired antiques dealer, decided against reinvesting the money. “I didn’t want the worry of owning a property,” says Turner, “so I found a lovely [four-bedroom] Victorian house to rent in Islington [for £1,250 a week].” Unfortunately for Turner, he has come up against a dilemma all renters fear: the owners of the property have decided to move back in.
Still, a recent survey by Rightmove showed home ownership remains the tenure of choice, with 96 per cent of those not yet on the ladder dreaming of owning their home one day and 69 per cent saying they would never stop trying. Many, however, are unlikely to realise their dream: although 57 per cent are saving for a deposit, of those only 19 per cent are on course to raise the money. Thus older renters in the capital may be stuck renting more out of necessity than design.
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