London Demographics Favour The Micro-Apartment Sector

February 4, 2019

With the average London tenant getting younger and spending more income on rent, micro-apartments are becoming an attractive alternative for both developers and buyers.

People renting a home in London are younger than ever and spending nearly a third of their income on rent. This is at a time when rents are on the rise, according to a new study from the Centre for London.

The average proportion of income spent on rent increased to 31.5% in the last quarter of 2018, the highest share seen in the last four years according to a new study from the Centre for London. Today, the average age of a tenant has decreased from 34 years in 2015 to 32 years. Whilst London tenants are getting younger and now spending nearly a third of their income on rent, the average rent in the capital has increased to just over £1,500 per month. This change is partly due to the 18% decrease in sales in the year to October 2018.

Delivery Of New Housing Falls Well Short of London Plan

With the number of first-time buyers at its highest since 2015, as well as the rental demographic changes discussed above, this calls for more affordable properties. However, there are worrying trends observed in the market, with new building down 7% in July to September 2018. With the delivery of new housing falling to 32,000, it represents less than half the desired level outlined in the new London Plan.

The analysis also found that a lack of confidence in the market is affecting the delivery of new housing. New build starts were down 7% in July to September 2018 compared with the previous year. Similarly, there has been a fall in the number of planning approvals by as much as 30% in the third quarter of 2018 for major schemes. Comparable trends are being observed among minor schemes.

Investors Should View Micro-Apartment Sector With Fresh Eyes

The suppressed supply levels may spur local authorities to incentivise the private sector to deliver additional dwellings in the future. This opens up a new opportunity for the micro-apartment sector. With players on the scene like Pocket Living (who specialise in the delivery of affordable studios and one-bedroom flats in London) some Londoners will overlook the existing Brexit uncertainty and the peak in the capital’s average asking rents. Such properties are also good news for first-time buyers. The micro-flat sector enables them to acquire reasonably priced alternatives in some of London’s most rapidly growing and bustling areas. It’s the ideal time for Developers and investors to reconsider their approach to affordable housing and investigate the opportunities presented by this sector.

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