How should investors respond to the UK’s changing property demands?
Traditional housing needs are shifting, and there is now a lean towards developments built for rent and aimed towards specific demographics, who are at a certain life stage.
Funding needs are changing to support these types of developments, and investors should think about looking towards considering new ways to access the UK property market. The typical approach to property investing has been through long investments in buy to let and equity. Investors are now looking towards short-term loan opportunities and using them to fund development of buildings in niche areas of the market.
Why is this change happening?
Over the last 30 years, home ownership levels have dropped dramatically. In 1991, 67% of 25-34-year-olds were homeowners, compared with just 36% in 2014. Meanwhile, private sector renting more than doubled between 1980 and 2014.
The decline in homeownership can be blamed on tighter lending standards reducing the availability of mortgage financing for first time buyers, and low interest and constrained housing supply helping to maintain high house price valuations.
The way people live and work is frequently less structured and standardised than it has been in the past. It is becoming less and less desirable to be held down by long term work contracts and other long term commitments, which has seen an increase in contract and self employed workers. For this very reason, many leases now include break clauses.
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