Money Men Predict Surge in Buy to Let

Money Men Predict Surge in Buy to Let

9:43 AM, 23rd August 2011, About 13 years ago

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"Buy to let is a changed market"

The case for investing in buy to let is moving into sharper perspective as financial firms with a vested interest in selling to landlords disclose their business insights into the sectors.

For landlords thinking about the future of the rental businesses and the prospects of expanding, it looks rosy.

The latest private rented sector statistics from the Communities and Local Government Department and estimates for the number of new homes needed to meet the demand of a growing population provide the hooks for everyone to hang their prediction hats on.

The CLG figures reveal 17.4% of homes are buy to lets, up from 16.4% in 2009. Around 3.1 million homes are rental properties – an increase of 229,000 since 2009.

At the same time, private ownership has fallen from 14.9 million to 14.8 million homes in the same period.

The key is buy to let is not expanding because new homes are available but because more people are opting to rent for personal and financial reasons.

The UK population is expected to grow to 71.6 million by 2033. The country needs 290,500 new homes a year for this extra population – that’s a city roughly the size of Coventry built every year for more than 20 years. Builders are churning out new homes at the rate of around 110,000 properties a year.

Nigel Terrington, of landlord lender Paragon Mortgages said: “More people are now relying on the private rented sector than ever before and we are certainly seeing a change in perception towards renting. The increase in rented homes is fuelled by a combination of landlords buying property with cash and buy-to-let mortgages, people letting out homes they have inherited and homeowners deciding to let their property.

“We are seeing a very different mix of tenants in the sector now. No longer is it dominated by students and young professionals, it is a much wider group including more families and mature tenants.”

Financial intermediaries are gearing up for an expansion of buy to let lending to fund a growth in demand for borrowing from eager landlords looking to add to their property portfolios.

Writing in financial adviser trade paper Money Marketing, Dev Malle is sales and marketing director at Personal Touch Financial Services reveals buy to let lending is reckoned to take 12% of the mortgage market.

Malle explained buy to let is 17% of Personal Touch’s mortgage business, and that the firm expects levels to increase to 21% business by 2015. The firm also predicts buy to let mortgages arranged via brokers will surge by 40% to £30 billion.

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