The Buy-To-Let Market: Past, Present and Future
Finance schemes specifically designed for landlords to fund buy-to-let investments were first introduced in 1996 as a response to growing demand for rental property and the corresponding need on the part of private landlords for a mortgage scheme to help with buy-to-let purchases. The initiative was largely the result of pressure from mortgage lenders and members of the Association for Residential Letting Agents (ARLA) who were aware of the increasing needs for rental property following the slump of the early 1990s.
In the period from the introduction of buy-to-let mortgages up to the present day the scheme has helped to fund a huge expansion in the rental market within the UK. The private rental market is now the second largest housing tenure category in the country and in 2013 overtook social housing for the first time since 1961. There have been various demographic and economic shifts since 1996 that have helped to increase rental demand and today the profiles of renters are much more diverse – we see many more families renting, for example, rather than buying their home.
Evidence gathered in October of last year by the mortgage lenders Paragon showed that when buy-to-let was introduced in 1996 there were tens of thousands of private landlords in the UK – today there are believed to be over two million with a collective portfolio of 4.9 million properties worth £989 billion. Around one in five properties in the UK is believed to be owned by a private landlord – with around half of the five million homes built between 1986 and 2012 in the UK being owned by landlords and let. During the financial crisis years at the end of the noughties the rental market continued to grow rather than being slowed.
At the start of 2015 confidence remains string within the buy-to-let market. It is now believed there are over 700 buy-to-let mortgage deals available for landlords looking to invest. Recent research has revealed that large numbers of landlords will be looking to further expand their portfolios in the next twelve months, with many landlords also expecting to see capital growth with property prices believed to be set to rise in the next year.
The report issued by Paragon estimates that over the next five years a further million properties will become available to rent, with the amount of capital being lent to buy-to-let investors rising by between twenty and thirty per cent annually. The consequence of such investment will be further reshaping of the housing market with around 35 per cent of all housing stock predicted to be owned by landlords and let out by 2032.