London to be transformed from city of home-owners to city of home-renters in a generation
Published at 00:01 AM on 16 February 2016
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 research¹ 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 include2:
- 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 relatively low 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 starting from 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 Snook, senior economist, PwC, said:
“This analysis shows that people are increasingly being locked out of owning a home in London, demonstrated by the sharp rise in private rental levels and sharp fall in home ownership.
“High prices are making homes in the capital unaffordable to most and could undo a century long trend towards rising home ownership rates - in just 25 years the city has been transformed to one where rental is becoming the norm – especially for younger people”
David Snell, partner, PwC, added:
“With around 60% of Londoners predicted to be renting by 2025 (40% private sector/20% social housing), policy will need to adapt. This could include encouraging a better quality of private rented accommodation including longer tenure periods, and more rental properties designed for families.
“Demand for housing in the UK has outstripped supply for more than two decades. Changing the outlook for generation rent will require us to build more houses than needed just to match population growth in order to make up the past shortfall between housing supply and growth in demand.”
Notes to Editors:
¹ Initial research on tenure was published in the PwC UK Economic Outlook report in July 2015 - this included projections at the aggregate level for the UK. Further research on tenure trends by age was distributed via press release in November 2015.
² The PwC analysis identified key predictors of historical trends in private renting and home ownership across UK regions, including demographic trends, housing supply, historic mortgage volumes and loan-to-value ratios of mortgages. Projections of home ownership and private renting were then made based on assumption of how each of these factors would develop and vary between regions until 2025.
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