Assetz® News - UK buy-to-let sector looking healthy

UK buy-to-let sector looking healthy

24th February 2006 |

Property investors are increasingly perceiving buy-to-let to be the most rewarding investment policy and landlords are now finding they can make a good living from both rental income and capital appreciation.

There are key differences, however, between the mentality involved in buying a personal property and that required when investing in a house to rent out. Malcolm Harrison of the Association of Residential Letting Agents has said that this distinction is something that is absolutely paramount to the success of a buy-to-let landlord.

"If you are investing in a property it is a cold hard investment decision," he said.

Mr Harrison went on to say that it is crucial to appreciate that going into the buy-to-let sector is "effectively starting a business". Accordingly, buy-to-let lenders are interested in knowing details about not only credit status but also the particular details of the business plan.

It is an issue that will be made all the more pertinent by changes to the Housing Act and the Disability Discrimination Act this year, both of which will make extra demands on the administrative duties of landlords across the UK.

Nonetheless, the rewards for doing the background work and making adequate preparations can be enormous. Mr Harrison has described the current buy-to-let sector as being "a mature market" and while this maturity is adding complications, it is also bringing much greater returns.

Indicative of this, Mr Harrison predicts that the privately rented sector will account for as much as 15 per cent of the housing market within the next five to ten years, up from 11 per cent this year.

The increased interest in rented accommodation is being driven by high levels of inward immigration, rising numbers of students and a fundamental social change by which many people are now happy to rent accommodation for extended periods.

Nick Gardner, director of Chase de Vere Mortgage Management, says that the future of the sector certainly looks "healthy" on the basis that "so many people are delaying buying until much later in life and many have a family by the time they can afford to buy".

The influence of the younger generations cannot be underestimated and Mr Gardner foresees a continuation of the desire for rented accommodation for years to come.

"There is increasing evidence that young people are actively choosing to rent," he said.

"They prefer not having a mortgage tying them down and renting has that flexibility that allows them to live in different areas with different people, often enabling them to live in parts of town that would be out of their reach for many years if they wanted to buy."

With the Council of Mortgage Lenders announcing this week that there was a 39 per cent increase in the number of buy-to-let loans advanced in the second half of 2006, it seems that UK investors are increasingly deciding that it is the investment policy that suits them best.