Pension crisis is bolstering buy-to-let market says RICS

The continuing pensions crisis is bolstering the UK buy-to-let market as investors choose to hold on to properties for the long term, says the Royal Institution of Chartered Surveyors.

Its quarterly lettings survey published today shows tenant demand for rental property is at its strongest since January 2004, with 23 % of surveyors reporting a rise in demand over a fall, compared to a 20% rise in the previous quarter. Rent levels have increased for the 10th consecutive quarter.

Current landlord instructions picked up in October, but are rising at an unspectacular pace compared to the boom years of the early noughties.

Despite reports of lenders relaxing borrowing requirements there has been no significant influx of new investors the cost of borrowing (interest rates) and prospects of capital growth remain by far the most decisive factors.

Just 4.1% of landlords are choosing to sell rather than re-let properties when tenancies come up for renewal – half the level of this time last year. The majority of investors are viewing residential property as a long-term investment.

Factors driving tenant demand are rising employment levels and continuing demand from first-time buyers unable to get a foot on the housing ladder. Increased immigration into the UK following the accession of the eastern European States is also having an impact in some areas.

The increase in tenant demand has been strongest in London, the South-East and the Eastern region. The North, Wales and the Midlands saw increases from an already firm base. Activity in Scotland is fairly subdued following strong increases earlier this year.

Jeremy Lead, spokesman for RICS, says: “The strength of the market is demonstrated by the fact there has been no significant investor exodus in the past year despite shrinking returns as house price rises stall.

“Many buy-to-letters are now choosing to stay in for the long haul, viewing their investment as a more significant part of their pension plan. For the time being at least this looks set to continue, with public confidence in pensions at an all time low.”