Growing Tenant Demand Turning UK Property Market Into A Rental Economy

Growing UK rental demand Recent statistics (August 2010) indicate that tenant demand in the UK continues to grow. The Chartered Institute of Housing (CIH) issued a report which states more and more people are looking to rent than to buy in the short to medium term. The Paragon Group's second quarter 2010 report also tells us three times as many landlords say that tenant demand is rising.

The number of private rented properties in the UK currently stands at 3.2 million and yields and portfolio values are holding steady. This makes now an excellent time to invest in Buy To Let property.

The ‘in-between' market

The report from the CIH suggests those on incomes between £12,000 and £25,000 are stuck between being eligible for social housing and being able to afford to purchase their own property.

Sarah Webb, chief executive at CIH, says: "The ‘in-betweens' do everything the government asks - working and generally not claiming benefits - but they have been forgotten when it comes to their housing needs and aspirations."

She continues: "The report shows that home ownership is out of reach for a lot of people and we need to move to a situation where renting is a positive choice. A golden age of home ownership is coming to an end. The time has come to move away from the notion of ‘right-to-buy' and ‘wrong-to-rent'."

For the investor-landlord, this ‘in-between' market provides a ready-made supply of prospective tenants.

Landlords cite rising demand

The Paragon Mortgages' PRS Trends Report confirms residential property is a strong investment vehicle. The quarterly snapshot of the private rented and Buy To Let sectors shows 29% of landlords recorded growing levels of tenant demand, compared to 24% in the first quarter. Looking forward, over a third (35%) of landlords expect demand to be higher in 12 months' time.

Nigel Terrington, chief executive at Paragon Group, explains: "Tenant demand has been rising consistently for two years and shows no signs of slowing down. Would-be home buyers continue to be unwilling or unable to step onto the property ladder, whilst longer-term social changes, such as greater numbers of single person households and economic migrants, are also creating more demand for rented property."

Trend statistics

The Q2 2010 PRS Trends Report also shows:

There was a significant increase in the proportion of landlords planning to purchase in the third quarter of the year. This is now at 21%, up from 12% in the second quarter.
Both yields and portfolio values remained steady during the quarter at 6% and £1.5 million respectively.
Landlords said a wider availability of mortgage finance, tax incentives and sustained levels of tenant demand encourages further investment in the private rented sector (PRS).

Buy To Let "scarcity" rumours put to rest

Reports also state "continued scarcity of Buy To Let mortgage finance", but this is not strictly true. Whilst the ‘in-between' market mentioned earlier may be unable to step onto the property ladder, investors need not be concerned.

If you have a good credit rating, your own home and are earning over £25,000 per year, obtaining mortgage finance should pose no problem. In fact, some lenders are offering up to 80%.

The UK property market may now be the toughest for first time buyers in decade, but the climate is certainly looking good for investors.

Ready to learn more about UK property investment? Check out our web page Understanding UK Investment Property. View details of currently available UK investment properties.

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