Patterns of home ownership in London are changing fundamentally. In 2000, almost 60% of Londoners owned the home they lived in (either outright or with a mortgage), with around 40% renting from either private landlords or the social sector. New analysis from PwC shows that by 2025 this could be reversed, with only around 40% owning their home, and around 60% renting, mostly from private landlords.
Previous PwC research highlighted the rise of private renting across the UK, particularly amongst 20-39 year olds (‘generation rent’), and predicted its continuation throughout the next decade.
This new analysis builds on this by bringing in regional findings. Whilst the London figures are the most striking, other notable regional results include:
- All regions and countries within the UK are expected to experience falling levels of home ownership and rising levels of private renting over the next ten years.
- Our analysis suggests that Northern Ireland will also experience high growth in private renting, reaching over 25% by 2025. This is driven by relativelylow levels of housebuilding and more youthful demographics (younger people are more likely to rent).
- Scotland and the Northern regions of England are expected to see faster growth in private rentals than the South (excluding London). These areas are startingfrom a lower base level and we are assuming the marked declines in the social rental sector seen historically will continue, albeit at a slower rate.
Richard Parker, partner in PwC's housing sector team, commented “A number of factors are driving this predicted shift in tenure within the housing sector: a lack of new housing supply to meet increasing demand has pushed up prices to unaffordable levels for many, mortgages deposits require savings that are well out of the reach of first time buyers and we're also seeing younger people increasingly showing a preference for high quality rental housing.”
“In a move to reverse this trend, the Government announced a bold ambition to build one million new homes over the course of this Parliament, alongside a raft of policy measures and subsidies aimed at promoting home ownership for first time buyers.”
“As a result, we're now seeing a growing number of investors putting significant funds into the development of quality, private market rental accommodation, which they are increasingly viewing as a long term revenue stream. While house builders have had to factor both affordable home ownership and low cost rent properties into their development plans to date, the likelihood is that as a result of the new housing and planning bill, we will now see a shift towards the development of starter homes for sale rather than properties for rent in the years ahead.”
This move towards renting and away from home ownership is also being exacerbated in part by home builders hiking prices of new build homes by up to 60% in London. Prospective buyers in the capital are being lured to over-pay for new homes by as much as £125,000, according to research by new property search engine Propcision.
It has long been accepted that new build properties can command a higher price. Homebuyers can expect to pay an industry-norm of a 20 per cent premium in exchange for a newly-constructed building and a pristine apartment.
However, when breaking down boroughs by a per-square foot unit, the Propcision statistics show that a homebuyer is actually paying between 35-60 per cent more to purchase a new-build property than a non-new build.
Shockingly, some developers registered with the government’s London Help to Buy scheme are charging up to 60 per cent more for their new-build apartments than the average price of an existing apartment in the same borough.