Alliance & Leicester’s ‘Changing UK Household Market’ report, undertaken in conjunction with the think tank Centre of Future Studies, showed that the buy-to-let market, fuelled by the growth in private rental, will play a pivotal role in the future of the UK housing market.
The three key drivers for buy-to-let growth will be:
- A rise in the traditional rental market, especially among students and single people
- Younger generations preferring to rent as it becomes more socially accepted not to own a home
- Increased use of rented property by people seeking flexibility and mobility
Professional landlords are defined as those who have a portfolio worth at least £1 million or who have been landlords for at least two years with six to 20 properties to their names. They also tend to be younger than non-professional landlords.
Stephen Leonard, director of mortgages at Alliance & Leicester, said: “Demand for rented property has been growing steadily in recent years and returns on buy-to-let have increased. This growth is expected to continue – as the number of renters rises further and buy-to-let becomes even more attractive to both existing and potential landlords.”
The buy-to-let market has grown rapidly over the last five years – there are currently 767,600 loans outstanding accounting for over 8 per cent of the total value of UK mortgages.
The state of UK landlords
Both professional and non-professional landlords in the UK currently own an average of four buy-to-let properties worth nearly half a million pounds. The majority (around half) of landlords own five or fewer properties, and around 2 per cent of landlords own more than 50 properties. London and the South East form the buy-to-let hub in the UK, with over 40 per cent of landlords owning property in these areas. Overall, nearly two-thirds own property in the South of England.
More than one in ten (11 per cent) of all landlords say their main job and main source of income comes from letting property. A further 20 per cent say that being a landlord is a part-time job which provides them with a substantial part of their income. The majority, just over two-thirds have another full-time job and mainly rely on other sources of income.
Leonard continued: “The prediction of further rate rises this year has fuelled debate on a cooling in the buy-to-let market with rental yields decreasing. However, with increasing numbers of professional landlords, and the majority expecting to stay in the market for more than ten years, buy-to-let is likely to remain an important part of the overall housing market.”
