BUY TO LET LANDLORDS & RENTED SECTOR GROWTH LETTINGFOCUS.COM

BUY TO LET LANDLORDS & RENTED SECTOR GROWTH - HELP FORM LETTINGFOCUS.COM

Why buy to let, landlording and the size of the UK rented sector will continue to grow. Plus the hot spots to look out for. For more advice ask David Lawrenson of LettingFocus.com

Property expert David Lawrenson of www.lettingfocus.com says, "To see where property investment is going, we first need to see where we have come from first."

Back in 1900 around 90% of all properties in the UK were privately rented. There then followed a steep decline so that by the end of the Second World War, about 50% of all properties in the UK were privately rented.

The years of post war rent control took their toll after 1945 which meant that with no money in the business of being a landlord, private letting collapsed further so that by 1988 private rented property accounted for only around 8% of all dwellings.

Since then things have changed massively following new laws which made it easier for landlords to recover possession and charge realistic rents.

In 1996, the buy to let mortgage was born and the proportion of houses which are rented has grown to about 11% today.

But how far will the growth of buy to let go?

Quite a long way possibly, as there are a number of factors that are pushing towards more privately let property.

Lack of housing supply

Kate Barker’s report for the government showed just how far behind the UK is at providing enough property for all the people who want to live here.

And the UK population is growing rapidly – having just passed the 60 million mark. This factor alone will push up house prices in the long term.

The biggest factor in population growth is net inward migration into the UK, with up to around 500,000 new immigrants coming into Britain every year in the early noughties. And for them renting property is the natural default option.

Renting a property is a lifestyle option for many

Of course, renting is a lifestyle that fits the “flexible work culture” - some others would call it the “hire and fire” work culture that we have in the workplace today.

This, of course, was one of the reasons why the government in 1988 and 1996 passed the Housing Acts because the thinking was you couldn’t very well get on your bike to find work if there was nowhere where you could park your bike at night.

The key point is that there will be many points in people’s careers where they will need to rent because renting gives them more flexibility. This increasingly goes right across the careers board - students, lower paid workers and up-market executives.

As jobs for life disappear the speed of change increases and more and more people will need to rent to give them access to the jobs they want at the different points in their career.

For others, staying in the property market will mean they will have a pied a terre in town for the week and go to their other home at the weekend. Some of these pied a terres will be rented, some will be owned as second homes.

Changing family structures

Another factor is increasing family breaks ups which mean that more people will rent whilst they consider their options following a breakdown in a relationship.

And there is also evidence that more people will choose to rent as they delay starting a family, a factor that has been called "extended adolescence." Back in 1983 the Council of Mortgage Lenders found that about 80% of U25s wanted to own their own homes within 2 years but in 2004 this figure was just 43%.

People have lost faith in other asset classes

Despite the credit crunch, people will increasingly look to property as a more secure investment than many others because many see the stock market as too volatile.

Many will have been stung by poorly performing endowments, the split cap scandal, the collapse of Equitable Life but most of all, they don’t trust the government on pensions. And the closing of many final salary schemes is just one more reason why people look to property to provide a safe home for some of their money.

And while property prices appear ever stretched against incomes, net property yields whilst lower now at about 3.5%, still compare favourably with equity yields.

Handout Homes

Finally we have the concept called “Handout Homes.” The Future Foundation coined this phrase in a recent report they did which showed that money for first timer buyers is increasingly coming from parents and grandparents in the form of cash assistance with deposits (and ongoing “income help” to meet mortgage repayments.)

By doing this, parents keep the family assets out of the hands of the chancellor from an inheritance tax point of view - well at least it does for those enough who are well off to spare money in this way.

Some of this goes into buying a student house for while the children study. There has been a big increase in the number of students in the UK over the last 6 years.

For those without well off parents to help them on the housing ladder, owning a house could become increasingly impossible, forcing many people to rent, thus providing a ready pool of tenants and rising rents, for those lucky enough to have invested in property.

Threat to the Private Rented Sector

Apart from the obvious threat of economic decline, which would hit rental incomes and house capital growth there is a risk that the government could further regulate or impose special taxes on the sector.

The probability of this happening is hard to quantify. However, it is unlikely that the government would do too much to hurt the private rented sector which does so much to help drive the economy through its ability to drive labour mobility.

Despite the effects of the credit crunch not all parts of the UK will suffer. Look out for where regeneration in the shape of new jobs or improvements to transport links are coming. We particularly like South & East Kent and South East London right now because of improvements to transport links.

About David Lawrenson and Lettingfocus.com

If you need more advice on buy to let investments please click here and ask me.

I’m David Lawrenson from property investment mentors lettingfocus.com. I’m the author of the buy to let book “Successful Property Letting - How to Make Money in Buy to Let” - the UK’s top selling property title.

The new edition is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on buying below market value.

What’s unique about lettingfocus.com is that we offer independent property coaching because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, estate agent or bridging loan financier and do not receive commissions from any of these sources either.

We offer advice both at our seminars and also on a one to one basis. Click here for more information.

Lawrenson and Lettingfocus.com – Freelance Writer, Speaker and Consultant

I am an independent expert on the UK property market and a well known property investment blogger.

I contribute to newspapers and a host of property websites as a freelance property writer.

My work as a property consultant also stretches to helping companies such as banks, building societies, housing associations and web portals with their buy to let and property products and services.

You can read more about my landlords networking programme at my website lettingfocus.com. Contact me for more information.

My next London property investors networking meeting is coming soon.

Copyright 2008 David Lawrenson. This article must not be copied or re-used without the author and copyright owner’s prior permission.