When Frank Da Silva moved into former athletes’ accommodation on the site of London’s 2012 Olympic Games, he became one of hundreds of thousands of people across Europe who are joining the continent’s biggest property trend: renting.
Brazilian-born Mr Da Silva, a self-employed creative director, and his partner Gianne Fanti, a chef, live in Vesta House in the former Olympic Village in Stratford, east London.
The block was built to house sportspeople during the Games, but organisers wanted it to have a permanent use once the event was over. So a company, Get Living London (GLL), was established by the site’s developers, Delancey and Qatari Diar, to manage the block.
Vesta House is an example of a new breed of accommodation in the capital — purpose-built rented housing run by a professional landlord. GLL took over the 1,439 homes in 2013.
As “a big fan of architecture and new designs for urban living”, Mr Da Silva “jumped at the opportunity to be a pioneer in a blank-canvas community”.
He is not alone. The UK capital is growing by about 52,000 households a year. One in four households now rent from private landlords, up from 15.3 per cent a decade ago.
The proportion of Londoners who own their home is falling, and recently dipped below 50 per cent for the first time in more than three decades. The city’s booming house prices have closed the market to many low and medium-income workers.
Renting is growing across Europe as home ownership becomes more expensive. High prices are forcing city dwellers around the world to pay billions of pounds more in housing costs, research by the consultancy McKinsey found last year. Big European cities such as London and Paris are among the worst affected.
However, declining rates of home ownership are not a bad thing, some experts argue. Renting is more suitable for city dwellers, fitting their transient lifestyles and unpredictable, flexible working patterns, according to Peter Rees, who was the City of London Corporation’s planning officer for nearly 30 years and is now a professor of planning at University College London.
The rise of renting in Europe is perhaps an indication that the continent’s housing market is moving towards that of the US, which is the world’s largest market for rented housing. There, 42.4m households — more than a third of the population — live in properties most commonly owned by huge, often publicly listed “multifamily” landlords who own multiple properties in a single building.
Mr Da Silva says that GLL offers high-quality terms and conditions and enables him to live in a well connected area with fellow professionals and potential clients nearby — and that is worth paying for, he says.
Neil Young, GLL’s chief executive, says renting is not just for those who are priced out of home ownership; better-off tenants will also pay for a well managed, professional service.
Setting up GLL “was an opportunity to change the way that people rent”, says Mr Young. “People want the quality and flexibility that renting offers. More people are moving away from seeing it as a second-class option.”
LL offers all tenants a personal relationship manager and has staff on site 24/7. It does not charge fees — costs are incorporated into the rent, which is not necessarily higher — and offers three-year contracts as standard. It also organises events such as film nights and shows events such as the Wimbledon tennis tournament on public screens.
Because of this emerging market of renters seeking good quality, professionally managed housing, companies such as GLL are beginning to attract deep-pocketed backers — pension funds and other institutional investors that like the long-dated and often index-linked returns they can offer.
A recently published report estimated that institutional investors from across Europe had set aside £30bn to invest in new rented housing in the UK. The research by law firm Addleshaw Goddard and the British Property Federation found that nearly a third of residential construction projects started in the first quarter of 2015 were for rent.
Graham Porter, head of UK property research at Aberdeen Asset Management, believes investors are keen to snap up such properties “because the income from them is extremely stable”.
“The market is growing, but from a low base and not quickly enough to keep pace with demand, so it will be some time before it reaches its full potential.”
Companies such as GLL are still a novelty in the UK, but there are other parts of Europe where they are the norm. Switzerland, for example, has some of the highest renting levels in the world. Only a third of Swiss own their homes. Nine out of 10 households in large cities such as Zurich rent.
In Germany, just under half of households rent their homes, with renting levels in Berlin, Frankfurt and other big cities topping two-thirds of homes.
Renting appeals to Germans because “house price growth has been nonexistent or muted over a number of years,” says Nicola Westbrooke, a partner at KPMG. Longer leases than in the UK are also a boon to tenants, as is the fact that most German rented homes are offered without fixtures such as kitchens — allowing tenants to add their own, making it feel more personal and homely.
Investment in most continental European housing markets is boosted by local savers who put their cash into investment funds that back rented housing, says Mr Rees. “In Paris, Vienna and Berlin, most people rent; they don’t own. As a result, property is a utility rather than a commodity. [People] use their money for consumption rather than boosting asset prices.”
He believes this is a more sensible approach than in the UK, where “septic investment money” from amateur landlords has poured into direct real estate investment — driving up prices and threatening to exclude aspiring buyers from the market.
But home ownership remains popular. A series of UK opinion polls shows that most renters aspire to become homeowners, particularly in London. Mr Da Silva and Ms Fanti are among them: they are saving up, and plan to leave Vesta House for a home of their own in about four years.
Source: Financial Times