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Long-term prospects for buy-to-let look healthy, says expert

6th March 2007 | back to article listings BACK    print this article PRINT

The prospect for the UK buy-to-let market is one of stability now and growth in the longer term, according to Capital Economics.

Ed Stansfield, the manager of commercial property and housing market research for the organisation, said the kind of circumstances that would lead to a downturn in the market simply did not exist.

He said: "Buy-to-let is here to stay and it is not going to act as a major source of instability or a sort of weak link in the housing market, which I think has been suggested quite frequently in the past."

Mr Stansfield emphasised that a key reason for this was that the recent entrants into the buy-to-let market still only accounted for a small amount of the overall stock of homes available for rent. Thus, he pointed out, even if many of the new landlords decided to leave the market the effect would be "comparatively limited," thereby ensuring stability.

Growth, on the other hand, would be generated by a longer-term shift, not away from home ownership towards renting but through a transition in the rental sector from public to private.

He said: "I don’t think we're going to see a structural shift in the UK away from people wanting to own their own homes and wanting to rent instead. But I think you can begin to make the case that the private renting sector can take up some of the slack from the socially rented sector."

Mr Stansfield is not alone in holding this view. Michael Ball, professor of urban and property economics at Reading University's Business School, told the annual conference of the Association of Residential Letting Agents today that the expansion of the buy-to-let sector has taken place by providing accommodation where the public sector has not, Estate Agency News reported.

He said: "Buy-to-let has increased the size of the private rented sector and extended the alternatives to both owner-occupation and social housing.

"It has also spread renting wider, to towns and suburbs that had little or no private renting before."

Professor Ball added that, at a time when more young people rent than used to be the case, this was highly beneficial.

The context of the speech which Estate Agency News was reporting was the claim that buy-to-let had in some way priced young buyers out of the market.

Not so, Professor Ball insisted. Rather, he said, the higher availability of buy-to-let offered an alternative to buying, while the real problem for buyers continued to lie with the failure of housing supply.

The last point, of course, relates to a long-term trend, in which the size of UK households has been getting smaller, generating demand for more living spaces. As long as this trend continues faster than new homes are being built, particularly affordable ones, the buy-to-let rental market can expect to look forward to increased demand.

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