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Footloose Britons set to boost buy-to-let
Positive attitudes towards renting and a desire to be ‘footloose and fancy free’ have sparked a surge in the buy-to-let market which is predicted to grow by over 40% within ten years, a study shows.
Alliance & Leicester’s Changing UK Household Market report, undertaken in conjunction with the think tank Centre of Future Studies, shows that the buy-to-let market, fuelled by the growth in private rental, will play a pivotal role in the future of the UK housing market.
The three key drivers for buy-to-let growth will be:
- A rise in the traditional rental market, especially among students and single people
- Younger generations preferring to rent as it becomes more socially accepted not to own a home
- Increased use of rented property by people seeking flexibility and mobility
Current trends will also continue to contribute to the success of the buy-to-let market. For example, the rise of ‘professional landlords’ those with rental income equivalent to the national average wage. This group now accounts for a fifth (21%) of all landlords.
Professional landlords are defined as those who have a portfolio worth at least £1 million or who have been landlords for at least two years with six to 20 properties to their names. They also tend to be younger than non-professional landlords.
Stephen Leonard, director of mortgages at Alliance & Leicester said, Demand for rented property has been growing steadily in recent years and returns on buy-to-let have increased. This growth is expected to continue as the number of renters rises further and buy-to-let becomes even more attractive to both existing and potential landlords.
The buy-to-let market has grown rapidly over the last five years there are currently 767,600 loans outstanding accounting for over 8% of the total value of UK mortgages*.
The state of UK landlords
Both professional and non-professional landlords in the UK currently own an average of four buy-to-let properties worth nearly half a million pounds. The majority (around half) of landlords own five or fewer properties, and around 2% of landlords own more than 50 properties. London and the South East form the buy-to-let hub in the UK, with over 40% of landlords owning property in these areas. Overall, nearly two-thirds own property in the South of England.
More than one in ten (11%) of all landlords say their main job and main source of income comes from letting property. A further 20% say that being a landlord is a part-time job which provides them with a substantial part of their income. The majority, just over two-thirds have another full-time job and mainly rely on other sources of income.
Stephen Leonard continued: The prediction of further rate rises this year has fuelled debate on a cooling in the buy-to-let market with rental yields decreasing. However, with increasing numbers of professional landlords, and the majority expecting to stay in the market for more than ten years, buy-to-let is likely to remain an important part of the overall housing market.
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