Ok so this is such a nebulous question you can’t really answer it, but we’ll give it a go.
We’ll look at what type of buy-to-let properties tend to have the most tenant demand,
We’ll also break it down into different kinds of areas and tenant types.
Here’s a quick summary:
- For young professionals, you’ll want to look at 1-2 bedroom flats.
- For families, you’ll want to look at 2-4 bedroom houses.
- For student lets you’ll want 3-5 bedroom houses to let out as HMOs.
- In suburbs expect to have high demand for 2-4 bedroom family homes near good schools.
- In city centres expect to see demand from young professionals and students.
- For resale value, semi-detached 3-bedroom properties are the best
- For rental yields, 1-2 bedroom properties are the best
- For the broadest appeal, go for a 2-3 bedroom property
We’ll give you some figures to make your own judgments and try to make conclusions ourselves to guide you.
To start, let’s get some figures straight.
Average Size Of A Household In The Uk
Since 1996 the average size of a UK household hasn’t really changed much.
In 1996 the average size of a UK household was 2.42 people.
In 2022 the average size of a UK household was 2.36 people.
So in general you’re looking at an average household size of more than 2 people.
If you assume most households are around 3 people then you would generally want 2 bedrooms as a minimum.
E.g. 1 bedroom for 2 parents, plus an extra bedroom for 1 child.
So with this, you’d assume that the most popular type of property would be 2-bedroom properties.
Of course, a household of 3 people may also want a 3 or 4-bedroom property if they need extra space for guests or to use rooms as home offices.
What Age Do People Rent Up To In The Uk?
In the UK housing keeps getting more and more expensive making it less and less affordable.
Because of this trend, we are seeing the average age of renters getting older over the long run.
Average Age of Private Renters
The most recent English housing survey gives us data on the status of the private rental sector. At the time of writing the most recent report is from 2021-2022.
In this report, the average age of a private renter is 41 years old. This surprised me.
This is compared to the average age of an owner occupier being 58 years old.
These ages are based on the Household Reference Person (HRP) and a HRP is the member of the household in whose name the accommodation is owned or rented or is otherwise responsible for the accommodation.
For example, if there’s a household of 3 people where there are 2 parents and a child, the household reference person (and therefore the age reported) will be for one of the parents.
Let’s look at a bit more data to get a better picture of renters vs owner-occupiers.
Average Age Of The First Time Buyer In The UK
As of the most recent time period that we have data for, the average age of a first-time buyer in 2021-2022 is around 34 years old.
This doesn’t mean that everyone ends up buying at 34 though.
This stat just means that of those that DO end up buying a house, the average age is around 34 for first-time buyers.
With first-time buyers, they would have to have been renting or staying with family before they buy their first home.
In the 2000’s this figure was around 30 years old so the age is definitely creeping higher.
By the age of 34, a fair amount of people already have children meaning they are likely to need more than just 1 bedroom.
The average age of mothers having a first child in 2020 was 29.1 years old.
Even without children, you’re more likely to want an extra bedroom by this age as you have slowly built up your belongings and possessions over time.
You may also want a guest room or office space.
Summary Stats
So the average age of the household reference person (HRP) in the private rental market is 41 years old.
The average age of a first-time buyer is 34. This number is probably skewed upwards because of more house sales in the South, so the first-time buyer age is likely to be lower in the North.
The average age that mother’s in the UK have their first child is 29.1 years old.
The average household in the UK has 2.36 people
Remember that these are just averages across the population, but they do give you an idea of what to expect from the private rental market in the UK as a whole.
My conclusion for this is that the average privately rented household will most likely have around 3 people including a child so will want at least 2 bedrooms, if not 3.
Most Popular House Type In The UK
In the UK semi detached properties are the most common type of housing stock and they make up just under 31% of housing stock in both England and Wales.
These can be great for investment properties too because semi-detached properties often have space for extensions or loft conversions to add value to the house.
But this is for housing stock as a whole.
However, if we look at just the private rental sector in England, flats, maisonettes, and apartments made up the largest proportion of privately-rented dwellings (43.6%).
In Wales, Terraced houses made up the highest proportion of the private rental sector at around 33.2%.
- Source: ONS
Demand In City Centres
It will depend on the city but in general, you will be looking at a tenant profile of young professionals and couples with no children.
For this kind of tenant profile, 1-2 bedroom properties do well.
If it is a city or town with a large student population then properties suitable for students will do well too.
Families are less likely to rent in city centres and in general they favour suburbs if possible.
Demand In Suburbs
In suburbs, you tend to have families with children that want good schools and outdoor space.
For these kinds of households, 2-4 bedroom houses are very popular.
A 3 bedroom property is a sweet spot as it works well for a household with 2 parents and 1-2 children.
Families are also likely to stay in a property like this for a long time as they won’t want to keep moving their children between different schools.
This makes 3 bedroom properties perfect for landlords who want tenants that stay a long time.
Just remember to check the area for rental demand before buying any old 3-bedroom property.
Some areas might have really high demand for 2-bedroom rentals, but other places might have a higher demand for 3 or 4-bedroom properties.
Most Popular House Type For Renters In General
In general, 2-3 bedroom properties tend to have a high demand for renters as they overlap different tenant profiles.
These properties will be wanted by both families as well as couples that need that extra bit of space.
These will tend to also be more suited to people that stay for a longer period of time.
In city centres, 1 bedroom properties can be popular, but they can also have higher turnover as young or single people tend to move around more as they move jobs or upgrade to have more space.
Best For Students
Students aren’t your typical renters.
Students will tend to do one of two things…
They either get together in groups and go for a house share in a HMO (house of multiple occupation) or go for studio flats.
So for example, you might turn a 4-bedroom house into a 5-6 bedroom house share by converting rooms downstairs into bedrooms.
Similarly, privately rented student blocks are becoming more and more popular where there will be a large block where each student gets a private room generally with an ensuite, with a shared kitchen between a certain number of students.
For students that don’t end up in a group, they’ll normally end up with a studio flat.
In general, as a small investor, you’re not going to be building or buying a large block of flats, but you can buy a 3-5 bedroom house and turn it into a HMO.
In most university towns there is a lot less supply than there is demand, so student accommodation tends to be oversubscribed well before the academic year has begun. Good for investors.
Best For Families
In general, families are going to want at least 2-3 bedrooms and some outdoor space for children. They’ll also want easy access to good schools by being in the right catchment areas.
For these reasons, you don’t get as many young families in city centre areas that are dominated by shops and office spaces.
Instead, city centre areas are dominated by young professionals and students (if it is a university town).
Best For Young Professionals
Young professionals will prefer 1-2 bedroom properties with good transport links for work as well as good amenities nearby.
People in their 20s with no children don’t really care for schools, but in general, they’re going to want to be close to where their work is for easy commutes.
They also tend to have a preference for having amenities close by like supermarkets, gyms, and a good choice of bars and restaurants.
2 bedroom properties will probably see more demand over time as more and more people are used to working from home at least part of the time and they may want to use the extra space for office space.
Best For Resale At Later Date
This is a bit of a side note because it’s not about rental demand but it’s still important to consider your exit plan if you decide to sell in the future.
For the best chances of good resale, you would want as much demand as possible.
This means you would want to appeal to both investors and owner-occupiers.
When it comes to owner occupiers the most popular type of property in the UK is a 3 bedroom property.
Again this will depend on the area so make sure you check demand for different types of houses in an area.
According to Property Solvers semi detached properties sell the quickest with an average of 150 days and flats on average take the longest at around 176 days.
This is the time from first being listed up to the point the property is officially marked as a completed sale.
Time taken from listing to completed sale:
- Semi-detached – 150 days 🏆
- Terraced properties – 152 days
- Detached properties – 155 days
- Flats – 176 days
Source: Property Solvers
It’s no surprise that flats take the longest as there tends to be more paperwork with flats being leasehold and fewer owner occupiers looking to buy flats compared to other types of properties.
But what about capital gains?
According to a post by Simply Business in 2018, terraced properties have had the best capital gains over the 20 years prior, followed by semi-detached houses coming in second.
Over a 5 year period prior to 2018, semi-detached properties had the highest capital gains.
| Property type | 5 year increase | 20 year increase |
|---|---|---|
| Detached house | 31.84% | 245.49% |
| Semi-detached house | 33.60% 🏆 | 269.59% |
| Terraced house | 32.16% | 281.87% 🏆 |
| Flat/apartment | 28.76% | 256.42% |
Best For Rental Yields
We’ll look at 2 different sources. We’ll use one from 2018 and one from 2023. When looking at both we can see that 1 or 2 bedroom properties tend to have the best gross rental yields.
Source 1: Simply Business (2018)
According to simply business we have the following information: 2-bedroom houses have the best rental yield for houses, and 2-bedroom flats have the best yield when it comes to flats too.
| Number of bedrooms | Rental yield for a house | Rental yield for a flat |
|---|---|---|
| 1 | 4.08% | 4.95% |
| 2 | 5.30% 🏆 | 5.16% 🏆 |
| 3 | 5.07% | 4.32% |
| 4 | 4.77% | 3.14% |
| 5 | 4.12% | 3.56% |
Source 2: Property Beacon (2023)
We wanted to run our own study on rental yields to see if the same applies today.
In our study we looked at the number of bedrooms a property has and the rental yields it would achieve. We did this for 14 different cities using data from home.co.uk.
Overall we found that 1-bedroom properties had the best rental yield, followed closely by 2-bedroom properties.
Here’s a link to the post where you can see the results in more detail:
Verdict
So what do you think is the best type of property for rental demand?
Well if you’ve read this post properly you should see that it depends on where you are looking to invest and the type of tenant you want to attract.
- For young professionals, you’ll want to look at 1-2 bedroom flats.
- For families, you’ll want to look at 2-4 bedroom houses.
- For student lets you’ll want 3-5 bedroom houses to let out as HMOs.
- In the suburbs expect to have high demand for 2-4 bedroom family homes near good schools.
- In city centres expect to see demand from young professionals and students.
- For resale value, semi-detached 3-bedroom properties are the best
- For rental yields 1-2 bedroom properties are the best
Overall semi-detached properties with around 3 bedrooms probably have the most demand for resale and they will also give you more opportunity to add value compared to a terraced house.
Based on the average size of a household and the average age of a private renter it would seem a 3-bedroom property is the sweet spot for rental properties if the area is right for it.
This way you’re likely to get tenants that are families that stay for a fair amount of time and you also have an easy exit to sell the property in the future as demand for these types of properties is high.
Further Reading
So you know what types of proeprties have the best yields and demand, but how will your rentla profits fair over time?
We wrote a post where we decipher what the average UK rent inflation is per year.