The private rental sector populated in the main by buy-to-let landlords has continued to soar and has grown by nearly 150,000 households in the year to March, with data from Kent Reliance showing rented accommodation accounting for 77.4 per cent of new households created.
The second edition of Kent Reliance’s report in the buy-to-let sector analysed Office of National Statistics census data to establish the size of the private rented sector and has forecast, on present trends, the sector will increase from 4.8m households in the UK to 5.5m by 2020.
The expansion of the sector has supported the rise in its value. At the end of March, the total value of property owned by UK landlords stood at £990.7bn, increasing by 11 per cent in the last year.
Across the country, this meant that annual returns seen by property investors totalled £111.5bn: £67.2bn in capital gains and £44.3bn in rents.
In total, this figure was £5.8bn higher than the £105.7bn landlords saw in March 2014, although it represented a decline compared to the recent peak of £137.5bn in September, when capital gains were at their highest in at least seven years.
Buy-to-let has been the subject of criticism from some quarters after research showed it has far outstripped other asset classesover the past two decades, which some argue is a result of billions in tax relief, including around £6bn in mortgage interest tax relief last year.
Past figures have shown some 80 per cent of new homes built since the turn of the century have been acquired by private landlords and some say the surge in buy-to-let, which has been bucking a wider trend of declining mortgage issuance, is making life harder for would-be first-time buyers.
Andy Golding, chief executive of OneSavings Bank, which trades under the Kent Reliance and InterBay brands in buy-to-let, commented that the sector has come of age, moving from a niche asset class to one big enough to rival the stock market.
“Long-term price inflation is not in danger, given the gaping chasm between growing demand for housing and the number of houses being built each year.
“Combined with the dearth of high LTV lending to first-time buyers, this will continue to buoy demand for rental accommodation, as well as landlords’ returns, and the sector will continue to expand.”
Latest property investor survey from buy-to-let mortgage broker Mortgages for Business backed up the findings, suggesting that over the next six months, two-thirds of landlords expect to add to their portfolios, compared to 55 per cent who were looking for new properties just six months ago.
David Whittaker, managing director at the firm, stated that a strong rental market is being driven by tenants moving to make the most of job opportunities and now gradually starting to earn more too.
“That new surge of demand is putting more upwards pressure on rents, and landlords are only just beginning to supply more homes to let in response.
“On top of this, after the surprise stability of a majority government, landlords will almost certainly see a short-term boost of house price growth – while the threat of damaging regulation has been lifted for at least the next five years.”
The study also showed that fixed-rate loans were less popular, with over a quarter of landlords opting for variable-rate deals.