What has led to the rise in the supply of apartments and the reason why they now outgun rental houses in the property market?
So, you have decided to join the growing market of Buy-to-let property and become a landlord. You have an area you like, a budget in mind, finance in place and you’re now ready to make a choice of which type of property to buy. If this was a decision you were making say 20 years ago, the main choice would have been a house, which you would either rent out or decide to convert to flats, if big enough and then rent those out. Back then, apartments were available, but were not as commonplace as they are now, and they certainly weren’t located as well as they are now.
The rise of the apartment is relatively new, over the last 20 years with the regeneration of city centres and old industrial areas the need for multiple properties on a site has led to a predominance of this type of property. City centre living has also been on the up and large city centres that were once empty after work or on weekends are now a busy metropolis. As is obvious the economics of a city centre site means that to build property on a limited footprint means you have to build up, and up they have built. London, Manchester, Liverpool, Birmingham and many other city centres have all seen an explosion of residential skyscrapers offering it’s occupants central locations and a vibrant city centre lifestyle with all the benefits that these new builds offer, pools, gyms retail space etc. As you can imagine this is difficult to compete with and leaves the humble house on the outskirts of most cities at a distinct disadvantage.
Typically houses were not built in city centres, and any new development these days tends to take place in satellite sites that benefit from great transport links to the nearest cities but are not central. Houses and new developments do not offer the same level of facilities that are on offer in apartment blocks, but what they will offer is perhaps a location that is nearer large open recreation areas, more suited to the family rental market, so when choosing your market that you wish to rent to, this may be a defining point, families tend to prefer renting houses as their location is more in line with their requirements.
Our view here is that there will be a generation that follows the model that mainland Europe and other parts of the world follow and that’s a generation of people who prefer the flexibility of renting to the rigidity of owning a property. So any fear that the rental market will be flooded with property and that this will have an adverse effect on rental values is misplaced, rental values are on the increase as people switch to this market to satisfy their housing needs, and its the young generation rent and the divorcing baby boomers that are driving demand, and their preference is to rent an apartment with all the facilities and convenience that these modern apartment blocks offer. The rental market for houses is still there, but once a couple decides to have a family, they typically prefer to move to a house, which they will tend to buy, as it is at this point they will decide to put down roots as the need to get children into schools and the like. The impact here is that those looking for a house to rent are a minority and the trend is set to continue.
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