Gross buy-to-let lending will grow three-fold in the next four years to reach £25.6bn, according to market analyst Datamonitor.
Datamonitor has published a report on ’Buy-to-Let Mortgages and the Rental Sector’ which forecasts that gross buy-to-let advances will grow from £8.5bn last year to £25.6bn in 2014.
The company predicts that gross advances will remain flat this year, rising to £15.8bn in 2012, £20.2bn in 2013 and £25.6bn in 2014.
The report predicts that the buy-to-let market will see a boost in confidence as house prices stabilise and demand for rental property exceeds supply.
Datamonitor found that rents are beginning to stabilise, and buy-to-let arrears are no higher than the rest of the market.
The report also reveals that just two lenders currently account for 80% of buy-to-let lending.
Datamonitor believes that the supply of mortgage finance will be unable to satisfy demand from buy-to-let investors over the coming years.
Nigel Terrington, chief executive of The Paragon Group, says: “Buy-to-let lending hit its lowest level since 2001 last year and the market is dominated by just two lenders.
“Investor demand has never been the issue, it has always been mortgage finance supply, which has been severely restricted since the closure of the wholesale funding markets.”
He adds: “There are a number of socio-economic and demographic factors that will drive demand for rented property in the future, such as inward migration, the rate of new household formation and the composition of those households, growing student numbers and a greater propensity to rent amongst young people.
“The private rented sector needs to expand to cater for these growing markets, yet it is being inhibited by the lack of available finance.”