Key Note Media Centre

Estate Agents & Services 2010: Renting is the New Buying…

There appears to be a widespread public expectation that the prolonged expansion of owner-occupation in the UK is drawing to a close. The major finding of consumer research* conducted for Estate Agents & Services, a new Market Assessment from market intelligence provider Key Note, was the expectation that, in the future, the number of people renting their homes (rather than buying them) would increase. Key Note's survey reveals that eight people in ten (80.3%) said they expected to see a rise in the number of people renting their homes, and among the 16 to 19 year-olds, nearly 19 in every 20 (93.6%) expected the number of tenants to increase.

As such, Key Note predicts that in the future home renting will become far more significant. A number of negative factors, such as economic uncertainty, an insufficient supply of well-paid jobs, tight lending criteria and requirements for substantial deposits when buying a home, will mean that letting will continue to gain importance in the estate-agency mix. Further factors such as the risk of having to sell the home in the future to cover care costs or Inheritance Tax also contribute to the arguments against home ownership. Key Note believes that such a fundamental shift would have far-reaching repercussions.

While growth in home renting creates opportunities for lettings professionals, it presents considerable difficulties for government finances. Housing Benefit, which is available to many lower- and middle-income tenants, was expected to have cost in excess of £19.91bn in Great Britain in 2009/2010, around £2,400 for every household in rented accommodation. This benefit is potentially vulnerable to cuts in government spending, with adverse impact on tenants' capacity to pay adequate rents and, consequently, on landlords' incomes. The proportion of landlords with at least one property to let grew only marginally between 2007 and 2010, with landlordship of multiple properties confined to fewer than one person in 50.

The private rental sector in the UK is far smaller than in much of mainland Europe, where renting of property is not regarded as an inferior option to home ownership. For example, in Germany, the home-ownership level is 55.6% of households, compared with 69.6% in England.

Looking to the future, demand for tenancies is set to remain strong, especially from would-be first-time buyers who have been priced out of the market. Students constitute another important client group for the rentals market, and mass higher education has augmented the trend for undergraduates and graduates to live near their university or college. Lettings and property management are set to be development sectors for estate agents through the next decade, as estate agents continue their business metamorphosis into expert property professionals. Residential property itself will assume greater importance in institutional investment portfolios.

It is interesting to note that Key Note's 2010 survey found estate agents had advanced in public estimation since its earlier 2007 survey. (A small majority of respondents in 2010, compared with a large minority in 2007, agreed that estate agents were properly regulated.) The 2010 survey findings also indicated that the majority of people would like estate agencies to offer a one-stop shop for all aspects of property purchase.

Letting has developed into a mainstream market, owing to the fact that fewer and fewer first-timers can make the leap from potential to actual buyers. Despite the rising demand for rented property, the unfavourable economic conditions impede the rental sector from reaching its full potential, with one particular problem being an insufficient number of new homes built for rent. Moreover, the future supply of homes to let is constricted in 2010 by a shortage of mortgage funds for landlords, which began to bite in 2008 and worsened in 2009. Lifetime leases offer new opportunities to estate agents, in addition to conventional equity release. By 2020, the release of capital from property is set to become the norm for owner-occupiers of pension age.

 

Press enquiries: Lisa Ivey at Key Note at livey@keynote.co.uk or 0845 504 0452. Press/review copies of the report are available on request.

 

Notes to editors:
* Key Note commissioned NEMS Market Research to survey attitudes towards estate agents and participation in the property market. The survey was carried out among a representative sample of 1,001 adults (aged 16 and over) across Great Britain. The survey, which was conducted in January 2010, follows a similar one carried out in April 2007. The two surveys have a core of similar questions. In addition, Key Note has interpreted statistical data, reports and announcements from government, companies and representative and independent organisations. This report also includes selected companies' financial results, using the latest information available on the 'my ICC' service (derived from accounts filed at Companies House).

 

Key Note's 2010 Market Assessment, Estate Agents & Services, examines how the business of residential estate agency has coped with housing market deflation and mortgage scarcity since 2007, when Key Note's previous edition of the report was published. Issues surrounding the end of the housing boom dominate the report, which (as in the 2007 edition) focuses on England and Wales. Key Note considers market changes in Scotland, but the different legal system there means that solicitors have a greater role than estate agents in Scottish home purchases.

Key Note Ltd has been providing commercially relevant market information to libraries, academia and businesses for almost 30 years. With over 1,000 titles available across 29 market sectors, and new or updated titles published every month, Key Note is one of the UK's most prolific and respected business information providers. Within the range, some reports are written in response to particular market conditions, whereas other reports will be produced regularly year on year.

View FREE Executive Summary & Table of Contents for Estate Agents & Services