The UK’s housing shortage is not new news, the issue has plagued government after government with the solutions put in place coming up short time and time again.
The National Housing Federation recently published the first-ever ‘state of the nation’ report on the housing shortage and found that more than eight million people, one in every seven, are being affected by the housing crisis across the UK.
Government solutions falling short
The government has promised to deliver 300,000 new homes each year by the mid-2020s to combat the shortage of housing. This is a mammoth task, a build rate not achieved in any year since the 1960s and one the government are actually yet to complete.
In 2017-2018 total housing increased by 220,000 in England and whilst this was an increase on the figures in the year previous it is not the promised 300,000 homes needed to combat the lack of available housing.
Housing Minister Esther McVey is confident that the target of 300,000 homes per year can be reached. She also went on to say that Britain could lead the way in terms of innovation and technology, championing Modern Methods of Construction.
The future of house building in the UK?
With the housing minister taking a keen interest in Modern Methods of Construction (MMC) and the Government dedicating £2.5 billion to supporting builders using the MMC methods it is likely that these types of builds will be more and more prevalent in the UK property market in the years ahead.
Japan and Sweden are currently leading the way in MMC, with offsite construction and the implementation of smart techniques homes can be constructed far quicker than the current average build time and are reported to be more eco-friendly, cheaper to construct and have 80% less defects.
Whilst innovation has moved on in other industries forward significantly house-building is yet to catch up, perhaps the ageing workforce within the sector has a part to play. The housing minister believes that MMC will open up new job opportunities for the younger generations with the requirement for digital skills.
MMC does still require more traditionally skilled workers for site assembly but presents a need for innovation; from green manufacturing to high-end engineering, architecture and 3D specification. The housing minister believes Britain could become a leader in the industry, embracing the new methods, growing talent and setting global standards; potentially fostering an export market as large as our automotive sector.
Impact on the private rental sector
Whilst there is a potentially exciting opportunity in the building of properties using modern methods to not only tackle the national housing shortage but to boost the UK economy overall, these changes will take many years to have an impact and in that time the demand for rented accommodation will continue to grow.
Research carried out by Knight Frank earlier this year predicts that £75 billion of investment will be committed to the professionally-managed Private Rented Sector by 2025.
Speaking with the largest funders and developers to gain insight into how the market will develop in the coming years, the report states that in 5 years’ time 56% of investment will be outside of London, an increase of 12% from current levels.
As demand for rental accommodation continues to increase in cities other than London as tenants relocate for work and in many cases seeking a better quality of life in more affordable locations it is unsurprising that developers too are turning their focus to key cities outside of the capital.
It is anticipated that there will be an additional 560,000 households living in private rented accommodation by 2023 for a variety of reasons, continuing to drive demand.
Opportunity for property investors
Letting agent Belvoir, who have offices across the UK, recently released data which shows pressure on the Private Rental Sector is being created from a shortage of housing stock, a doubling of tenant applications and continued rising rents.
Following their analysis of the market earlier this year Belvoir’s chief executive went on to say that he hopes the Government will make changes which will help to increase the supply of properties to the market.
For investors, the continued increase in demand for rental property presents an excellent opportunity. A risk of investing in has always been void periods, if a property is empty it is not producing the necessary income. In a market where demand for rental property far outstrips the supply, this risk is greatly diminished.
Build-To-Rent a solution for the housing crisis?
The Build-To-Rent (BTR) sector has presented itself as a solution to the housing shortage across the UK. BTR properties are specifically designed and built with renting in mind. These properties are built to a high standard with quality continuing to be at the forefront of most tenants minds when considering a place to live. Developers are also focusing on local transport and amenities.
These purpose-built properties are built to scale and to a consistent standard and once completed are managed by an accountable property manager which appeals greatly to many tenants.
We expect to see a surge in BTR developments in the coming years as developers work to meet the demand for housing. The model allows investors to achieve long term investment returns whilst also providing tenants with high-quality homes.
Focus on Birmingham
Those who have lived in London or might have chosen to move there upon joining the workforce are fast changing the trend and choosing to move to other cities and towns across the UK that offer better value for money especially when it comes to renting a property.
Buying at the right time in the right location can make a huge difference to the outlook for an investment property.
Birmingham has a fast-growing population, impressive economic strength which continues to evolve with new technologies and an entrepreneurial spirit in the workforce. Add to these factors the many regeneration plans for the city and the development that has already taken place to great success; Birmingham is a prime investment opportunity for those starting or building their rental property portfolio.
Talk to us about your investment plans
With exclusive access to new developments, our team of property experts can offer advice on the best rental property to purchase to match your requirements. For more information contact us on +44 (0) 2039507939 or send us an email at info@thirlmeredeacon.com.
