Demand is increasing for landlords

Demand is increasing for landlords

As the clouds of winter begin to lift and warmer climate finds its way to our shores, and as flowers and wildlife begin to re-emerge in the expectation of a more hospitable climate, we’d be forgiven for treating it as a bit of a metaphor for the buy to let market in recent months, and the distinct feeling that a man-made storm is beginning to pass.

As resilient as the Private Rental Sector (PRS) is, and has been, it has certainly felt like a concerted effort by recent governments to chase the tenant vote at the expense of landlords, estate agents and investors alike.

A raft of tax changes, new laws and regulations have meant that adjustment has been key, but also that opportunity has arisen for those with a diversified and strong portfolio.

One thing that remains true of private rented housing and buy to let more generally is that demand is not set to decrease any time soon. It simply isn’t up for debate that tenant demand will increase in the coming years and may even rise indefinitely for the foreseeable future.

With regards to home ownership rates, the UK population own their own homes less than at almost any other time in modern history, and polling and public opinion appears to suggest that there won’t be a change in circumstances on that front.

Unsurprisingly then, rather than driving landlords out of the industry full stop, it’s professionalised the market and those who have innovated are seeing more opportunity than ever to seek out robust and rising yields, as well as solid tenants thanks to this surge in demand.

The most recent Office for National Statistics (ONS) data shows that private rents increased by an average 1.5% year-on-year based on comparable data from the previous year. That’s also up 0.1% from the previous month’s data.

The increase was 1.5% in England, 1.3% in Wales and 0.6% in Scotland comparatively. This has been taken as a positive overview of growth across the country, with Scotland the only region trailing behind.

The South West fared the strongest of the regions at 2.3%, with East Midlands second with 2.2% and the other regions varying between 0.6% and 2%. That being said, the overall average was a positive growth. This also paints a very strong long-term picture with growth hitting 8.6% since January 2015, despite fears that there could be a slowdown.

Another tell tale sign that the market is on an upward trajectory is that mortgage lending figures have increased markedly for buy-to-let mortgages in the most recent figures released by UK Finance Mortgage Lending Trends Statistics.

Year-on-year lending figures showed a 3.6% increase in buy to let mortgage approvals compared with the same period in 2018, showing that not only are applications increasing but so are acceptances, showing a strong appetite from both investors and lenders. Re-mortgages were also up 2.3% on the same period, showing that many are even increasing their portfolios in anticipation of a big year in property.

To build a complete picture we have to take a number of snapshots from the relevant groundwork, but given the information we’ve been provided so far this year, it’s fair to say that the environment certainly appears to be ready to warm up in spring-like fashion for investors and landlords.

With more property becoming available, and with investment increasing, this is showing that the appetite for further investment is responding to the clear demand for it. Not only that though, lenders are also seeing these same signs and are displaying their confidence in the market by lending to it.

It’s worth saying again – demand for PRS isn’t going to decrease, not even in the next half a decade or further. Home ownership rates aren’t increasing and the property market we’re seeing now is essentially unrecognisable from the early to mid-2000’s.

Renting has now become the norm for the majority of economically active people in the UK, with only a fraction of those people seeking to seriously save up for a deposit any time soon. Whilst the government in some respects have done what they needed to in response to a rapidly changing electorate, so too have landlords and property investors. Now, it seems, is the time for that to pay dividends.

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