The growth in buy to let has attracted a lot of comment recently. Some say there is a new army of landlords flooding the market with an oversupply of rental property. Others claim that too many BTL purchases keep first-time buyers off the property ladder.There are scare stories in the tabloids and in the mid-markets. Even the broadsheets like a bit of BTL bashing. But I believe the truth is less dramatic. The private rented sector is a well-established part of the UK housing market and has been for many years, with around one in 10 properties rented privately. BTL is not a flash in the pan or a new craze. Neither has it grown explosively. According to Government statistics, the number of privately rented households grew by 2.7 per cent a year between 1996 and 2005 compared with 1 per cent annual growth in the number of households overall. It is modest – rather than explosive – growth and today there are still fewer privately rented homes than there were at the start of the 1970s. Post-war Britain was a country of aspirant owner-occupiers and the reputation of private rented accommodation was poor – with landlords stereotyped by Rising Damp’s Rigsby. But changes in the sector’s regulation along with a combination of social and demographic changes have established the modern private rented sector as a key component of the UK’s housing strategy. The focus of comment has typically been on supply but what is rarely discussed – and where the revolution is happening – is in demand for rented property from new tenants. One of the most significant new factors to take off in the last few years is immigration. According to National Statistics, net migration into the UK in 2005 totalled 235,000 people, the biggest influx since records started in 1991. That is equivalent to 0.4 per cent of the population – or a city the size of Derby. In comparison, natural population growth added only 0.2 per cent. For the future, the Government Actuaries Department forecasts average annual net immigration in coming years to be 145,000 although recent experience suggests this may be conservative. These people have to live somewhere and it is good news for BTL. The population is rising by 0.6 per cent a year and the number of households being formed is rising even faster. The annual rate is 0.8 per cent, equivalent to 209,000 new households every year. Migrationwatch calculates that immigrants account for one-third of this total, around 69,000 homes a year. Immigrants do not usually have the funds to buy a home and do not usually qualify for social housing so almost all of them will find homes in the private rented sector. The evidence is that most will stay there, too. Research from The CML shows that only 20 per cent of immigrants become homeowners within five years of reaching the UK. This means that demand from immigrants could boost the private rented sector by 55,000 homes every year, equivalent to the total number of homes on the Isle of Wight. Quite apart from this major external driver of demand for BTL, there are a number of key changes among the UK’s indigenous population. The fall in the number of FTBs is an extremely important one. The average age of those buying their first home is now 34. Until they finally take the plunge, most of these people find accommodation in the private rented sector. The flexibility that renting offers young professionals in particular should not be overlooked. Without ties to a property, younger people are more mobile and more able to respond to an increasingly flexible labour market. One of the reasons people are buying homes later, apart from the high price of housing, is the growth in higher education. People are entering the labour market later, often with big amounts of student debt. It takes them time to build their finances to the point where they can afford to buy and the rising cohorts of students are principally finding homes in the private rented sector as rooms in halls of residence have become rarer. The proliferation of single person households is a final key part of the puzzle. In 1991, six million people lived on their own or were lone parents in England. By 2006, this had risen to nine million. The increase is due to the rising number of old people (who often end up living alone), young people deferring marriage and, of course, divorcees. Older people are more likely to be owner-occupiers, divorcees often suffer financial hardship and do not buy a new home immediately so divorcees – and younger people – enter the private rented sector. The Centre for Economics and Business Research forecasts 40 per cent growth in the private rented sector over the next 10 years, equivalent to around a million homes, around half of which could come from immigration alone. While one million may seem like a big number, in the context of the Government’s forecasts for the growth in households and the major social and demographic shifts the UK is undergoing, it is really rather modest. The political debate will rage on about how desirable these trends may be but the homes will still need to be found. There is no political will or tax money available to provide hundreds of thousands of new council homes.
The Government has delayed the pensions aspects of the incoming anti-ageism laws.
The Association of Home Information Pack Providers is to launch a voluntary code of practice for Hips which all its members will subscribe to.
It is difficult to look at the Kent Reliance intergenerational mortgage as a product as it is more of an initiative. This idea is long on concept and short on detail. The only place I managed to find information on this mortgage is in the press as the Kent Reliance website had no information and […]
Average equity-release rates are now lower than average standard variable rates for mainstream mortgages, says Safe Home Income Plans. Brokers have hailed the news as positive but stress it is vital that the industry gets the point across to consumers. Ship looked at annualised interest rates for the top 10 equity-release providers and found that […]
By Robin Geffen, fund manager and CEO
This year threatens to be a challenging one for UK dividend hunters. Last year saw an all-time record amount paid out in UK dividends — some £97.4bn, according to research from Capita Dividend Monitor. Yet as Capita also pointed out, out the biggest single factor driving the growth in the fourth quarter of last year was easy to identify: the rising US dollar.
In our view, this trend is much more than simply a one-quarter phenomenon. It is actually the most profound issue to get right as a UK equity income investor in 2015. We believe that the US dollar will continue to strengthen significantly from its current level. This is due more to the US economy’s demonstrable de-coupling from the rest of the world than to a view on the UK. The US has a strong chance of tightening monetary conditions this year without jeopardising growth or de-stabilising its housing market. The same can unfortunately not be said about the UK.
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