Buy-to-Let Boosted as Property Rentals Exceed Sales for the First Time Since the ‘30’s

As fewer people are buying property, the rental market is booming.

By 2017, there will be more Brits renting their home than owning it – a product of rising house prices and a crowded property market.

This is based on research by the estate agency group Countrywide, who report how the rental market is fast becoming the more desirable way for would-be buyers to live in the current climate.

Johnny Morris, the Countrywide research director, notes that:

“As some would-be buyers and sellers sit on their hands, this has continued to boost the rental market … September saw record activity, with increasing numbers of lets agreed and tenants choosing to renew their contracts. On current trends 2017 could be the first time since the 1930s that more homes are let than sold.”

As fewer people are buying property, the rental market is booming.

Image credit: Henry Burrows via Flickr

Affordability

It seems that the main stumbling block for first-time buyers is the simple fact that house prices are too expensive for average earners.

Data from the Office for National Statistics shows that the median house price has risen by 25% since 2013, a period where wages haven’t increased at the same rate. This has pushed many would-be buyers into the letting market by circumstance and not by choice.

Renting is much more affordable in the long term than buying a property.

Image credit: Scott Lewis via Flickr

This increase in house prices means that renting long-term has become less expensive than buying. Real estate experts Savills say this is compounded when the cost of repaying capital is taken into consideration alongside mortgage repayments.

Lucian Cook, the director of Savills’ residential research, points out that:

“…it’s not only the challenge of funding a mortgage deposit that was constraining people’s ability to get on to the housing ladder, but also the extra expense of paying down a capital repayment mortgage over time.”

Booming Buy-to-Let Sector

The thriving rental market has been good news for landlords across the UK throughout the 21st century, and although many thought the rise in stamp duty on second homes and looming tax changes would cripple the market, confidence still remains.

For example, enquiries by prospective landlords at Rightmove have risen by 30% since June. This in turn led to the number of properties being available to rent increasing by 6% across the country.

Despite changes in taxes and stamp duty, the buy-to-let sector is booming.

Image credit: Tim Green via Flickr

These positive signs are despite the government measures to reduce tax relief in 2017, reducing the possible 40/45% respite down to a flat-rate of 20%. In fact, these changes may make it easier for new buy-to-let investors to delve into the market as the playing field is levelled-out.

In terms of tenant numbers, it’s perhaps the easier nature of renting that has seen levels rise higher than house sales for the first time in over 80 years. There’s less risk involved, especially in what some consider a volatile period, and often comes with much less hassle than buying outright.

For investors, knowing which route to go down will depend on your personal circumstances, as well as possible market trends and how future tax implications will affect profit margin. However, to minimise a risky buying strategy, it’s recommended to seek professional advice from a reputable estate agent before deciding on your next move.

If you found this helpful, you might also be interested in Why Brexit Can Be a Great Opportunity for Property Investors.
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