New trends in tenant behaviour
Tenant preferences and choices in the rental market are continually evolving due to ever-changing trends influenced by external factors, including the pandemic and the cost of living crisis. These factors undoubtedly play a significant role in shaping tenant decisions when it comes to selecting their next rental property.
Tenant preferences and choices in the rental market are continually evolving due to ever-changing trends influenced by external factors, including the pandemic and the cost of living crisis. These factors undoubtedly play a significant role in shaping tenant decisions when it comes to selecting their next rental property.
In light of the current situation characterised by high demand, soaring rents, and limited housing supply, there are five key ways in which these circumstances are impacting tenant behaviours and choices within the private rented sector.
Expanding property search areas
As rental costs surge, tenants' financial constraints are tightening, as evidenced by reports indicating that rents have outpaced average earnings for the past 21 months.
Consequently, tenants are broadening their horizons and exploring areas beyond their initial preferences to find affordable homes that they can secure quickly in the midst of high demand.
Data reveals that renters, on average, are expanding their property search radius by 50 square kilometres. As a result, real estate agents should adapt their approach to accommodate this expanded geographical demand and advise landlords on the potential opportunities it presents.
Demand for student properties
The demand for student properties is on the rise. As of November 2022, research indicated a significant shortfall of 1.5 million beds in purpose-built student accommodations, leading students to seek alternative options in the private rental sector. This trend is expected to gain further traction in the coming periods.
Young people staying with parents
Young people are increasingly opting to stay with their parents for extended periods to accumulate savings for a house deposit, providing some relief from the prevailing financial pressures. Consequently, the influx of new renters into the market is delayed, and some individuals are bypassing the rental sector altogether, choosing to purchase a home directly.
Data from January to May 2023 reveals that only 4.6% of people renting a new home were first-time renters, a decline from 6.1% in 2015.
This is due to the soaring cost of living and unprecedented rental growth, which have strained affordability to its limits, resulting in a steady decrease in the number of first-time renters since 2015.
Renters are getting older
Saving for a deposit is becoming a lengthier process, resulting in renters reaching older ages before becoming homeowners. A fortunate few who can reside with their parents manage to save more rapidly. However, due to increased rents and house prices, the average time required to save for a deposit across England has now extended to 10 years. Consequently, first-time buyers, particularly in major cities like London, are now approaching their forties before achieving homeownership.
Some lenders have proposed potential solutions, such as the 100% mortgage for renters. However, this approach has faced criticism concerning the risk that even minor declines in house prices could leave homeowners owing more on their mortgage than the actual value of their property.
Relationships between landlords and tenants
Having a strong and positive landlord-tenant relationship holds significant value. According to data, over 33% of tenants in a recent survey expressed their willingness to renew their tenancy agreement, even if it included a rent increase, solely because of their positive rapport with the landlord.
Interestingly, this willingness to renew with increased rents becomes more prominent as tenants age. Among tenants aged over 55, more than 25% stated they would accept a new contract with a rent increase, while an equal number preferred a renewal without any increase in rent.
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