New research reveals the rapid growth of the private rented sector in the UK

Over two million homes have changed tenure in the last decade when taking into account all property sales between owner occupiers and landlords, according to new research.

Some 1,550,000 properties have gone from being lived in by their owner to being lived in by a tenant, while 550,000 have moved the other way, from the private rented sector into owner occupation. 

This has resulted in an extra million homes being occupied by a tenant rather than a home owner, equivalent to the number of households in the North East of England, says the research from property group Countrywide plc.

Homes transferring from owner occupation into the private rented sector accounted for half of the growth in the number of privately rented homes over the same period. Most of the remaining growth in the private rented sector has come from landlords buying new build homes.

The research also found that some 700,000 new homes built since 2005 have found their way into the private rented sector. The remaining homes changing tenure have come from social housing and residential conversions. Despite this, homes are only around half as likely to change tenure as people.

First time buyers end up buying 65% of the homes that leave the private rented sector, and last year 45,000 first time buyers bought their home from a landlord, the highest number since the market downturn in 2008. This equates to 15% of all those who got onto the housing ladder for the first time.

With first time buyers and landlords tending to look for homes which are smaller and cheaper than average, they often find themselves in competition. As a result, both groups are disproportionately likely to sell homes to one another.

The research explains that given the private rented sector is largest in London and the South East, this is where first time buyers are mostly likely to buy their home from a landlord. One in five new buyers in London, and one in six in the South East, bought a home which had previously been rented out.

It is in these two regions where the difference between what new buyers paid when buying from a landlord and those that didn’t is greatest. Those buying from a landlord paid on average 8% less than those that didn’t.

‘The rapid growth of the private rented sector has to come from somewhere, while the tenure may change, the physical home remains,’ said Johnny Morris, director of research at Countrywide.

‘The sector has been growing since 2005 but the number of home owners has fallen in each of the last 10 years. This scale of shift in tenure shows that the current push from the government to increase the number of homeowners is unlikely to be enough to reverse the decline,’ he explained.

‘Although landlords and first time buyers might not appear natural bedfellows, because they tend to look for similar types of homes they do end up selling to each other. Many landlords face a choice 10 to 15 years after buying a home, between refurbishing the property or selling it. Those landlords who choose to sell up offer an opportunity to first time buyers willing to put some work into their first home, often adding to its value,’ he pointed out.

‘Rents grew by 4.8% over the year, supported by the imbalance between growing tenant demand and constrained supply of homes to rent. The usual seasonal factors are seeing small month on month falls after as the summer rush continues to subside,’ he added.

The research shows that as of October 2015 the steepest average rent for newly rented properties is in Central London at £2,479, up 1.1% year on year and up 0.6% month on month, followed by Greater London at £1,300, a year on year rise of 5.8% and month on month increase of 0.6%.

This is followed by the South East at £994, the East of England at £841, the South West at £734, Wales at £648, Scotland at £639, the Midlands at £628, and the North at £624.