Celebrating its 10th anniversary this year, buy-to-let is going from strength to strength as more people seize the opportunities offered by investing in bricks and mortar.
Demographics and lifestyle factors have helped boost the buy-to-let phenomenon. People are remaining single for longer, are increasingly likely to cohabit rather than marry and divorce, and separation rates have risen.
These changes, along with rising numbers of students and immigrants seeking rented accommodation favour the trend to flexible tenure.
This all suggests that demand for rental property will remain strong and will continue to encourage investors.
The sector has been a source of growth for private housing stock. The evolution of a structured buy-to-let sector has meant that the nature of the rental stock has changed, resulting in a significant improvement in the average rental property.
There is a much wider range of rental property available these days, while at the lower end of the scale, local authority housing departments are keen to attract more residential investors.
At the top end, the demand for expensive central London properties is high with significant numbers of professionals choosing to work and rent in the capital.
Property investment offers a significant advantage over equities in that investors can readily borrow to invest. When house prices are rising, this ability to gear up can greatly enhance re-turns. This is why the market has played such a significant role in the revival of the private rental sector.
High house prices and low investment in social housing have allowed buy-to-let to become a prominent part of the overall housing market. There is a feeling among investors and lenders that the outlook is positive and that it is capable of catering to society’s changing needs.
Given that competition among mortgage providers is greater than ever, most analysts believe that buy-to-let is capable of delivering significant growth over the next few years to meet the growing demand for rented accommodation.
Successive surveys from the Association of Residential Letting Agents suggest that professional landlords – who account for 45% of total investors – are adding to their portfolios and are optimistic about the sector’s prospects.
Professional landlords have targeted the student market for some time. This trend looks set to gather pace as the proportion of young people in higher education nears the government’s 50% target. Student numbers rose from 800,000 to two million in the 20 years to 2002.
The markedly higher yields and lower void periods available on student lets have also attracted people to this sector.
There is still a considerable shortfall in student accommodation, which is an opportunity for the private sector. Cities with two or more higher education establishments are favourites and there are many university towns where there is not enough property to meet demand, including Bristol and Bath.