Rental property market growing despite tax reforms

Factors such as inheritance and build-to-rent are contributing to the steady growth of renting in the UK

for sale signs on rows of terraces
(Image credit: Getty)

Landlords are now selling more homes than they are buying in the UK, in part due to the recent changes in the taxation of rented property. Despite this, the UK rental property sector is continuing to expand, with Hamptons International predicting six million rented homes by 2025.  

What is behind this growth? It is important to distinguish between the growth in the number of renters, many of whom are renting because they can't afford to buy, and the increase in the number of homes available to rent, which is happening for different reasons, not all of them to do with the increasing demand for rental properties. 

Firstly, the number of homes built specifically for renting has increased dramatically in the last few years (by a whopping 30 per cent in the past year alone), and although their number is still small, about 118,000, this is likely to change in the coming years.

 Another factor that's propping up the growth of the rental sector is inheritance: about 16 per cent of homes for rent come on to the market via people inheriting a property; 200,000 UK homes change ownership through inheritance every year.  

The third most common scenario is a home that is rented out after the owners move out, whether due to upsizing after starting a family or relocating for work. And with a tough market for selling, many homeowners opt for letting out their property instead of trying to sell. 

So, while the property market may be sluggish, property still remains a major source of wealth, with most people opting to invest in a home, if they are able to do so. Brexit or no, the UK housing stock is collectively worth an astounding £7 trillion.