By Charles Ferguson-Davie
The latest ONS figures reveal that the UK population has exceeded that of France for the first time ever, and is projected to reach 72.5 million by mid-2032. This would represent a nearly 5 million increase from 67.6 million in mid-2022.
Population growth has primarily been driven by higher net migration, which is a trend that will be hard to shake given the UK’s ageing population – with over-65s estimated to be 27% of overall population by 2072 – creating a necessity for more people of working age to support the economy.
New housing supply for many years has, and will continue to, struggle to keep pace with this growth. Figures from ONS and Bidwells estimate that 550,000 new homes will need to be built a year to accommodate future population growth and support economic stability. Just over 200,000 were built last year.
With planning, skills shortages, global macroeconomic uncertainty, elevated build costs, net zero requirements, and increasingly squeezed government finances all serving to severely constrict delivery, the UK must look to employ a more diverse range of solutions to address its housing backlog.
One of these lies in further institutional investment into the rental market. Institutional investors own just c.3% of the UK’s rental stock; the figure is 37% in Germany where a much higher proportion of the total population rent housing (40% compared to 20% in the UK), and the institutional rental market is more mature.
A greater supply of professionally managed rental homes will be good news for renters. Scaled portfolios mean operators have more capacity to ensure quality in the delivery and management of housing owned by long-term capital. Institutional investors such as insurers and pension funds with long-term liabilities like rental housing’s inflation-tracking qualities, while a structurally undersupplied market will continue to act as a tailwind to support capital growth.
Addressing the housing crisis is fundamental to the UK’s future economic prospects. To succeed, the country should fully embrace and encourage institutional investment in the professionally managed rental sector.