Nationwide figures suggest second wind for buy to let

Landlord Expert
By Landlord Expert July 1, 2010 10:05

House price growth has stalled, according to Nationwide's June index figures, yet estate agents report that residential rents are rising. Could the housing market be undergoing a structural shift towards renting, rather than owning property? If so, it's bad news for housebuilders, but great news for buy-to-let landlords...

Levels of UK home ownership have fallen 2 per cent in the past 10 years to 68 per cent, and property consultant Savills expect this to fall by a further 6 per cent. "First-time buyers are having to find in excess of 100 per cent of their annual income to fund deposits. Clearly, this will lead to a much bigger private rented sector in time," says research director Lucian Cook.

"People are fixated by house prices, but transaction levels are the real story. For the past two years, housing transactions have been 53 per cent of the medium-term average. That's 1.5m people who normally would have bought a house or moved house who haven't, putting greater pressure on the rented sector."

In areas of high demand, private rents are shooting up. London property management group Young Group reports annual uplift of 25 per cent on residential lease renewals, although increases of 5 to 10 per cent are more typical.

Listed estate agency chain Winkworth reports it has 40 per cent less rental stock on its books going into the peak summer season, blaming so-called 'reluctant landlords' selling up, and few new entrants to the buy-to-let market.

Housebuilders, meanwhile, are more uncertain about what the future holds. In a trading statement this week, Taylor Wimpey chief executive Peter Redfern expressed concern about the impact of the government's forthcoming spending review on social housing grants, not to mention deposit assistance schemes.

And London-centric housebuilder Berkeley reported that transactions are 40 per cent below normal levels. However, half its current sales are to property investors; many are foreign buyers tempted by the weak pound (see results on page 49).

Landlord Expert
By Landlord Expert July 1, 2010 10:05

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