Assetz® News - Buy-to-let opportunities as household sizes fall

Buy-to-let opportunities as household sizes fall

9th June 2006 |

A key factor in the growth of buy-to-let investment in the years to come may well be the gradual move towards smaller households in the UK.

With high divorce rates and more and more people simply choosing to retain absolute independence, demand for housing in the UK is growing strongly and this is inevitably sustaining house price inflation.

But for many, the ability to leave a property and move with work is a crucial aspect of living an independent lifestyle and so rented accommodation is increasingly becoming the preferred choice.

Purchasing a property is no longer seen as a necessary progression for many young professionals and the freedom of renting is in fact perceived as an advantage for many. With increasing numbers now living alone, the buy-to-let sector may well be set to benefit.

The average household size in Scotland is set to drop to below two people by 2024, for instance. The latest Household Projections for Scotland report from the General Office for Scotland has predicted that the number of households with just one adult will rise from 770,000 to over a million in the same period. By 2024, therefore, singletons will represent 40 per cent of all households in Scotland.

For this reason, investors may well be looking to add apartments to their portfolios in the coming years.

Duncan Macniven, registrar general for Scotland, said: "Within the next 20 years, the average household will include two people or fewer. This is because average household size has been getting smaller for some time; people are increasingly choosing to live alone."

As well as a rise in the number of couples with no children in the next few years, it is also thought there will be a rise in the number of households containing one adult and one or more child. This again is a trend that may well see demand for rented accommodation remaining high.

A report in the Cumberland News has also suggested that there has been a significant alteration in the way that people view rented accommodation. While it may be relatively new to the UK, enthusiasm for renting has actually been high elsewhere for some time.

"The number of people who are renting properties rather than buying has increased," said Val Goodfellow, managing director of the Letting Centre in Carlisle.

"We are becoming more like Europe, where there has been a large rental market for many years. Young people are renting for longer while they save up for a deposit on a property. We also get professionals, families and some people who are retired looking for a property to rent," she added.

With this in mind, the recent conclusion from Paragon Mortgages that investor landlords are typically looking to expand their portfolios seems fairly understandable. Buy-to-let investment has enjoyed an extremely strong start to 2006 and experts are generally indicating that activity will remain high throughout the remainder of the year.