Millennials Face Renting Into Retirement
Current trends in home ownership have shown that a third of millennials could be renting until the time they retire. But is this always a bad thing? For investors looking at Buy-to-Let, it represents a clear opportunity, especially if this current generation adopts a more European approach and ‘lifetime renting’ becomes more commonplace.
At the current rate, up to half of the generation (which includes people born between 1981 and 2000) face the prospect of renting into their 40s while a third could be renting permanently.
The number of families with children renting across the UK has also skyrocketed, increasing to 1.8 million from 600,000 in 15 years.
In a report by the Resolution Foundation, experts found that around 4 in 10 millennials across the UK are currently renting privately at age 30. This is double the rate that ‘Generation X’ faced at the same age and nearly four times the rate that ‘Baby Boomers’ experienced.
These figures are particularly important for Birmingham, which is recognised as having one of the youngest populations in Europe. With nearly 40% of Birmingham’s 1.1 million residents under the age of 25, around 4 in 10 of those will still be renting at 30 and beyond.
Right now, that’s nearly 176,000 people all looking for rental opportunities across the second city. It’s important to remember that this number highlights demand from Birmingham’s current population before we even consider any growth over that period of time.
A senior policy analyst at the Resolution Foundation believes that Britain’s housing problems “have developed into a full-blown crisis over recent decades and young people are bearing the brunt.
“If we want to tackle Britain’s ‘here and now’ housing crisis, we have to improve conditions for the millions of families living private rented accommodation.”
Accountancy firm PwC also predicts that as the price of owning a home rises, 7.2 million households will be in rented accommodation by 2025, compared with 5.4 million now.
What Is ‘Generation Rent?’
So what does this mean for investors? If nothing changes, Birmingham could see a much higher demand for rental opportunities as tenants in ‘Generation Rent’ continue to stay off the property ladder. Combined with a rising popularity in city centre apartment living; a growing population and huge commercial developments, Birmingham is quickly establishing itself as a true buy-to-let investment hotspot.
But is so-called ‘lifetime renting’ a bad thing for millennials? Owning a property has always been seen as the main goal for people in the UK but internationally, particularly in Europe, renting is par for the course.
In Germany for example, only 43% of people own their home with the rest choosing to rent instead. This is mainly due to regulations being much more favourable towards renters, with caps on rent increases and a solid supply of rental housing.
Resolution Foundation believes the UK should bring in similar ‘continental-style’ rules, offering more flexible contracts that provide security for both the tenant and the landlord.
In theory, a European model would benefit both parties, providing added stability for tenants who stay in one location longer and ensuring minimal void periods for landlords.
Whether or not the UK embraces renting over the traditional homeowner aspiration, it seems clear than changes need to be made to the private rented sector as it will become an even bigger part of Birmingham and the wider UK if current trends continue.
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