"Some may sell but most landlords continue to view property as a long-term investment with regular monthly income and capital growth when they eventually sell up."
The UK needs the private rented sector (PRS) more than ever as demand for housing increases in line with population rises and changing demographics.
In 2021 the UK population stood at 67.33 million, a 7% rise from 2008 when it was 61.81 (World Data) and it is expected to reach over 70 million by 2030.
During the same period, the number of households in England in the PRS rose by 45% between 2008-09 and 2020-21, from 3.1 million to 4.4 million (English Private Landlord Survey 2020-21). In England, one in five (19%) of households now rent privately compared to 14% in 2008-09.
The PRS is the second largest tenure after homeownership and is now bigger than the social rented sector. With the sell off in council housing started by Margaret Thatcher’s Right to Buy scheme in 1980 and hardly any new housing built to replace those homes sold, the social rented sector has declined.
In 1979 there were 5.5 million homes provided by local authorities and housing associations in England, down by 27% to 4.1 million in 2021.
This growth in the PRS is coupled with demand as there are just not enough properties available for rent and rental payments are rising. So you would think being a landlord is attractive but we keep reading in some parts of the press of doom and gloom with landlords selling up.
Landlords buy and sell all the time and certainly more landlords have been buying and entering the market in recent years. There are around 2.66 million landlords in the UK and this has gone up from 1.75 million in 2013. Almost half (45%) of them own just one property with the main reason for doing this as a long-term investment.
The latest English Private Landlord Survey 2020-21 found that nearly half of landlords (48%) said they would keep their portfolio the same size while 20% had not yet made plans. A similar number of landlords said they would increase their portfolios (11%) as said they would decrease (12%) or sell their portfolio (10%).
Compare this to the survey in 2018 where 53% of landlords had no plans to change, the same percentage (11%) planned to buy more properties, 10% said they would reduce the number of properties and 5% planned to sell and leave the rental business.
Within that five-year gap, these statistics are not that dissimilar and although slightly more landlords are intending to sell, eight out of ten landlords are in it for the long haul.
In addition to the fall in number of households living in social housing, homeownership rates are also declining. In 2019/20, 65% of households in England were homeowners down from a peak of 71% in 2003. House prices are out of reach for so many people while high deposits and strict mortgage affordability rules mean many aspiring homeowners have no choice but to rent.
So the PRS will continue to expand as evidenced by the Build to Rent sector gathering momentum and strong buy-to-let mortgage lending. The PRS growth is a big opportunity for both new landlords to enter the market and existing ones to increase their portfolios. Some may sell but most landlords continue to view property as a long-term investment with regular monthly income and capital growth when they eventually sell up.
For intermediaries there are opportunities to expand your buy-to-let knowledge to the more specialist parts of the market, if you don’t do so already. This includes portfolio landlords, limited companies, houses in multiple occupation (HMOs) and multi-unit freehold blocks (MUFBs), which are all growth areas.
Specialist buy-to-let lenders deal with complex cases every day and have experienced business development managers who able to assist intermediaries. It is really beneficial if intermediaries are able to speak directly to underwriters as well. All of our cases are manually underwritten and both underwriters and BDMs work closely with our intermediary partners sharing the same goal to find the best outcome for your landlord clients.
