One in five properties in the UK are now owned by private landlords according to a recent government report. It is estimated that a further one million homes will be bought in the next 5 years purely for letting purposes; meaning more and more of us are signing for rental agreements rather than mortgage arrangements.
Over 2 million private landlords own and let in the region of 5 million properties throughout Britain, according to figures presented by mortgage provider Paragon, and 18% of all UK households now rent from private landlords. This trend shows no sign of stopping either as investors see buy-to-let properties as a source of solid income.
Time for Tenants
Government figures indicate that by 2032, over 1 in 3 properties will be owned by private landlords. But what about the tenants? Well over the last few years, the tenant profile has changed somewhat. There are less single people renting but more couples are choosing the letting route – possibly due to the rise in cost. Approximately 35% of letting tenants are between 25 and 34, with a further 22% aged between 35 and 44. This indicates that young professionals and young adults in general are choosing to rent rather than buy, perhaps against their own choice or desires.
With so many buy-to-let schemes in place, many young people either cannot afford to buy or simply cannot find a property worth investing in. This may also explain the increase in terraced house rentals over semi-detached and detached house rentals.
What Are We Buying?
Terraced housing is usually a lot cheaper than semi-detached or detached housing in the same area, so it is no surprise really to see the number of PRS occupants increase over the last decade. Cheap to buy and cheap to rent, this figure should continue to rise. For the same reason, semi-detached and detached figures should continue to drop.
Surprisingly though, converted flats or houses of multiple occupation (HMO) are no longer the biggest earner for buy-to-let moguls. Buying a building and converting it into multiple flats used to be a lucrative move; nowadays though the figures have dropped by 11% since 1997. So the evidence is clear, if you are looking to start your own but-to-let venture then focus on terraced housing and young professional tenants.
Where are We Buying?
According to the Telegraph, the top five locations for profitable buy-to-let developments are Southampton, Manchester, Nottingham, Blackpool and Kingston upon Hull, all averaging at between 7 and 8 per cent rental yield.
Student areas in particular are successful for buy-to-let, and northern cities in particular make it into the top ten, which “is attributed to their relatively low house prices combined with strong demand for rental property from students and young professionals.”
Wellesley & Co. specialise in asset backed, secured lending, and all loan applications are reviewed by our experienced credit committee. Because we carefully consider a borrower’s assets and security before providing them with finance, we only lend to reliable property developers who are rigorously checked, maximising security for our borrowers. To find out more about our projects, and to find out how you could play a part in it, click here.