Demand for rental property is set to soar by more than 1 million households over the next five years, despite a raft of measures from the government to help turn generation rent into generation buy, according to the latest findings from estate agents Savills.
While the government has set a target of building 400,000 new affordable homes for sale over the course of this parliament, Savills has forecast that an additional 220,000 homes for rent a year will still be needed to meet demand.
Private renting has been growing by 17,500 households per month on average over the 10 years to 2014, according to the English Housing Survey.
Low interest rates combined with the economic recovery have done little to reduce the need for rented housing, while house price inflation ahead of wage growth has pushed property prices out of reach for many.
Critics of the government’s recent policy announcements to dampen the buy-to-let sector have argued they could have a huge impact on the rental market.
Industry experts have warned that the 3% stamp duty increase in April as well as the reduction in tax relief landlords can claim on properties from next year could push up rents as they look to recoup lost money.
Chancellor George Osborne unveiled plans in the Autumn Statement and Spending Review to build 400,000 homes as part of the government’s commitment to boosting home ownership.
First-time buyers under 40 now have the opportunity to buy a property at a 20% discount and a raft of new measures were also introduced to encourage developers to build affordable homes.
There are now a number of government schemes to help people get out of the rental sector and on to the property ladder, including Starter Homes, Shared Ownership and access to larger equity loans through Help to Buy London.
Susan Emmett, director of Savills residential research, said demand for rented homes could still rise more sharply than forecast.
“We would question whether policies can accelerate housebuilding enough to see the government’s target of 400,000 affordable homes for sale reached in the timescale set. And given the overlap between the different schemes, each focused at similar parts of the market, it is possible that one scheme could simply replace the other rather than providing additional homes.
“This analysis demonstrates that we still need to provide a substantial number of homes for rent. Government policy should focus on supporting the development of new homes to rent as well as to buy.”
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