Estate agents should reshape their businesses around lettings

Many more people will be renting in future rather than buying, says an influential new report into the estate agency market.

Market research by Key Note reveals that eight in ten people (80.3%) expect to see a rise in the number renting their homes, while among young people aged 16 to 19 those expecting not to buy but to be tenants rises to 93.6%.



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, says thereport. 

Key Note believes that such a fundamental shift would have far-reaching repercussions.

While growth in renting creates opportunities for lettings professionals, it presents considerable difficulties for Government finances. Housing Benefit currently costs about £20bn – around £2,400 for every household in rented accommodation. This benefit could be hit by spending cuts, adversely impacting tenants’ capacity to pay adequate rents and, consequently, harming landlords’ incomes.

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.



There is a huge question mark as to whether the sector in the UK would be big enough to cope with rising demand,  especially from would-be first-time buyers who have been priced out of the market. Mass higher education has also augmented the trend for students to rent near their university or college.  

Lettings and property management are set to be growth areas for estate agents through the next decade, as they continue to transform their business into "expert property professionals", says Key Note's new report (priced at £899).

Residential property itself will assume greater importance in institutional investment portfolios.

Key Note also found that estate agents were more popular than in a survey in 2007. A small majority of respondents today, compared with a large minority in 2007, when Key Note's last research was issued, agreed that estate agents are properly regulated. The 2010 survey findings also indicate that most people would like estate agencies to offer a one-stop shop for all aspects of property purchase.

Other findings in the survey are that lifetime leases offer new opportunities to estate agents, in addition to conventional equity release, and that by 2020, the release of capital from property is set to become the norm for owner occupiers of pension age.

www.keynote.co.uk