The trend towards private rentals in UK is expected to continue due to the combination of escalating house prices and stagnating salaries. It is predicted that by the end of 2021, 25% of British households will be renting rather than owning property.

This will represent an increase from the current figure of 21% of households renting privately according to a report from estate agency Knight Frank based on a survey of 10,000 tenants. These figures reflect the switch over the last decade towards rental for a large swathe of the adult population and, in particular, young adults.

A new socio-economic demographic has emerged with distinct categories both of which are saving for a deposit to buy a home:

(1) Nesters: couples ranging from late-teens to those in their 40s;

(2) Soloists and sharers: 25-49-year olds.

These groups tend to spend as much as half their income on rent. Despite their wish to save for a deposit on a home, almost 70% still expect to be living in rented accommodation in three years’ time. The spiral of high rental payments – although surveys indicate that such payments are flatlining or even falling – eroding savings means that many will remain indefinitely and inescapably as renters rather than owners.

This housing market was very favourable to buy-to-let landlords but recent legislation such as stamp duty on second homes and a curbing of mortgage interest relief has made it less attractive for private landlords. The vacuum is being filled by City investors who are financing the construction of purpose-built rental blocks and this “build to rent” sector is worth £25bn today with Knight Frank predicting its value to rise to £70bn by 2021.

A clamour for regulation to protect tenants has led to City firms pledging three-year tenancies but it remains a highly lucrative market for investors.