Buy to let is booming again reminiscent of the late 90’s but this time with a strange twist. According to the latest research from ARLA the Association of Residential Letting Agents, the boom this time is being led by the Midlands and Northern Regions outside of London. Normally London leads the Way for any housing trends, but this time it seems different.
ARLA, in conjunction with the RLA Residential Landlords association, surveys Landlords and agents nationwide and in their latest quarterly survey, some surprising results came forward about investing habits across the UK. The survey showed that the regions with the highest number of landlords buying property across the country during the last 12 months were the North East at 30%, the Midlands at 26% and the rest of London at 26%
Traditionally London has led the way in the housing market and the Rental Market in the past, but these results clearly show that investors elsewhere across the country are firmly in the belief that now is the time to buy property again and are jumping in and purchasing properties to rent.
It may be because in the outside of London areas, the returns and yields are much higher and easier to achieve cash flow, with relatively low starting capital or investment hence making the offering much more attractive. The lack of funding available may also be a factor resulting in the need for cheaper properties to be sourced for investment.
Surprisingly only 18% of the landlords in the South West actually state that they bought rental property during the last year, whilst at the same time 10% actually sold property, this being the highest number stated in the UK, showing a clear and interesting trend.
One of the benefits of investing in the midlands and the northern regions is that the cost of the properties in the first instance is substantially lower, this results in landlords being able to buy more properties for the same level of investment. This is actually a great strategy for the purpose of spreading your risk, as it means that if you have a property or tenancy that goes bad, you have more “good” properties to carry the portfolio.
This is demonstrated by the research in that it shows that landlords in the North have bigger property portfolios, with an average 13 properties per landlord in the North East and North West. In comparison, landlords in Central London and the South East own an average 6 rental properties each.
There also appears to be large growth in some areas, more than others. In some cases this is due to the favourable Student markets (in some areas, this is declining) also the large investment in HMO properties nationwide. Houses in Multiple Occupation for professionals and working people have become popular due to the current, and set to increase housing shortage, as well as tenants wanting to be more sure of their outgoings with all inclusive rents.
Some Councils are more in tune to HMO development and conversion leading to regional variations, some councils have managed to make it extremely difficult for landlords to convert properties to HMO`s by joining up to the Article 4 scheme, requiring all HMO conversions to have planning consent. There has also been the recently unveiled “local Enterprise Zones” targeting regions set for future growth which should aid growth in certain areas.
All of this is positive for the Private Rented Sector or PRS, which is set to increase from its current position of 16% of the total housing stock to 50% by 2050, but needs a boost to take it to the next level. Demand from tenants is still phenomenal and is far outstripping supply and with the possibility of home ownership nothing more than a dream for most youngsters, the PRS needs to increase dramatically to meet those demands.
If larger scale investment is not made into the PRS over the next few years, there could be huge shortage of choice for tenants entering the rental market, also if the demand continues to increase at the current rate, with supply not improving, most towns could see a substantial increase in the rents being charged, as the simple scale of supply and demand is totally out of line currently.
It is also a concern that if the Private Rented Sector becomes a provider of 50% of the nations homes, then regulation will be required and made to insist on consistency of property & trading standards nationwide and to cut out the unscrupulous landlord/agent operator. The positive of this is that it will also help to preserve the good name of many Good ethical landlords and agents that already operate clearly, safely and ethically.
One of the first regulations we will be seeing towards this is the minimum Energy rating for rented property from 2018, which will leave many properties currently on the market to let, un-rentable in the future.