It is interesting to see how the number of landlords has risen over the last ten years and how much money has been invested in property to let to UK residents. Why has the landscape changed? Why are so many people looking to property as the safe haven for their hard earned disposable income? The world of investment in property is not just for those with the silver spoon or the big pockets, there are more and more hard working people preferring to become a landlord because they have recognised an opportunity for them and their family.
Official figures show that nearly 2 million households have been added to the rental sector in just over 10 years and some are predicting that by 2016 one in five households will be owned by a landlord. This represents an increase of 150% to 5 million and 34% of mortgage lending in the last year alone. After the credit crunch, banks and building societies restricted buy-to-let lending, but more recently they have relaxed their criteria and many are now competing to win custom. Some have reduced deposits whilst others have cut interest rates.
It is clear that private landlords are set to own £1tn worth of homes by the spring of 2015. The Office for National Statistics estimate that it is currently £930bn and rising. There is a heavy concentration of landlords in London. They equate to 41% of the sector's value (£377.3bn) while the south-east comes next with a value of £137bn (15%). In total, landlords across Britain receive £3.8bn a month in rent and the average landlord has seen a return of 15% over the past 12 months, equal to £27,475 per property, and across the sector returns totaled £124bn.
There is a need for more housing and with less houses coming to the market and less new properties being built the rental sector will continue to grow. Anything that is being built or coming to the market that could appeal to tenants is being snapped up quickly. The sales market is benefiting significantly from this apparent desperation not to miss out on any property that is capable of being let and making a reasonable yield.
Although there are signs that house price growth could be cooling there is no doubt that landlords have benefited from the recovery in house prices and whilst the ongoing squeeze on wages, rising house prices and the impact of the mortgage market review provisions continue to have an effect the number of people looking to rent will only grow.
New rules announced by the Chancellor recently will only fuel the landlord population and consequently the number of investments in property. Pension reforms will permit anyone over the age of 55 to make their own decisions on what to do with their pension pot. It is believed that one in ten of those eligible will use all of their pension to purchase a property to let. This could have a significant impact on moving the value of investment property way beyond the £1trillion.
The property market needs investor activity and any initiatives that make a difference should be welcomed. The only sting in the ointment is the number of properties coming to the market. Is there going to be enough to go around? Are the prices going to rise as competition between landlords increases? I suspect we will see a flat property sales market in 2015, made more buoyant by the increased enthusiasm and appetite of new landlords looking to cash in their pension pot.Suggest a correction