It’s not just single people and couples in their 20s or 30s who are renting.  A new sector of tenants is coming through – working families – and this is having an impact on the whole residential property market says David Lawrenson of buy-to-let consultancy, LettingFocus.com

“Recent research from the Alliance & Leicester has found that nearly a quarter of families are now renting or still living with their parents,” said David Lawrenson.  “And for over half of these, this is a lifestyle choice – in other words they are renting because it suits the way they live, not because they can’t afford to buy.”

It is thought there are a total of about 17 million adults not on the property ladder, and other statistics from the lender, Abbey show that about 5.6 million of these could afford to buy but did not want the commitment.

And according to the A&L the trend for family renting will contribute to the private rented sector growing by 39% by the year 2014.

Of course, most families will prefer a house with a garden but they may be disappointed because Britain’s past planning policies have led to builders building flats rather than houses.

“So it’s no surprise then,” points out Lawrenson, “that other statistics I receive continue to show that not only are the prices of houses going up faster than flats but they are renting better too.”

“For example, figures from the lender Paragon show that gross rental yields on houses are about 6.3% compared to 5.5% for flats. So, its not just capital gains that houses are showing up well on - its good rental growth too,” he added.

But why does this older generation – many of them parents - want to rent when they could buy?

Lawrenson argues: “It could be that some are old enough to remember the last property crash which started in mid 1989 and in London lasted until 1995. (London was one of the worst hit areas and prices collapsed over 30% during this time.)”

“But I think the real answer is that first-time buyers - who today are aged around 34 on average – like the flexibility that renting offers them.”

In the hire and fire culture that exists today, this desire for flexibility is as true for families as for professionals with no kids.

Renting means that they can stay mobile and be able to move, to find work or to re-train.

There are also other social changes going on, in particular the trend for people to get married (and start families later). Indeed, this trend preceded the current boom in house prices. Lawrenson points out a Council of Mortgage Lenders survey showed this was already happening right back in the mid 1980s. 

But More Family Sized Homes Could Be on the Way

Lawrenson reasons that whilst the new planning policy statement (PPS3) just released by the government may just shift the emphasis from high density development towards a bigger supply of family homes, this will of course take years to come through.

The previous planning guidance, PPG3 which came out 5 years ago, led to problems in some areas as it encouraged too much higher density development. In some towns this resulted in large numbers of flats getting built even though demand for them was low.

“So it can be no surprise then that in some towns, the price growth of flats has been sluggish - and because there were too many flats (many of them bought by amateur landlords) so rents fell too,” said Lawrenson.

“The new PPS3 reforms seem to promote the provision of more family homes, so hopefully we could see the balance redressed towards builders building the properties we need.”

“But anyone buying property should take note that it will take many years before you start to see any impact on prices. In the meantime, family houses which are in short supply will continue to prove to be a better investment than flats,” he adds.