Private rented sector growth to continue

February 7, 2014

The private rented sector (PRS) in the UK has more than doubled in size in the past 14 years and it is set to keep expanding, according to a recent report.

The report into the sector – by estate agents Frank Knight – monitors the performance of residential rental units in key rental markets in the UK such as London, Manchester, Leeds, Bristol, Birmingham and Glasgow.

The index revealed that average rents paid rose by an average of 2.9% last year – ranging from 0.4% in London zone 1 to 5.27% in Manchester.

Capital values for residential properties also rose by an average of 6.4%, taking the gross yield to 6.6% in Q4 in 2013.

Yields have not only been tightened by the rising capital values, but also the tightening of discounts offered for purchase of residential blocks.

According to the report, around a sixth of the UK population – more than 10 million people – are currently living in privately rented accommodation. The sector accounts for around four million households, some 17% of the total number of households in the UK.

The number of households in the private rented sector is forecast to continue to rise over the next 10 years.

Demand for PRS remains ‘robust’ in urban centres and investors are best off targeting workers looking for flexible tenures according to the report.