Private rental sector ‘boosted by financial conditions’

Although many recent studies point to a gradual slowing down within the country’s housing market, it has been suggested that in fact there are a number of reasons why buy-to-let property investors should be optimistic about the their future prospects.

According to Simon Gordon, head of communications for the National Landlords Association, the introduction of the 1988 Housing Act helped to revive a declining market by ensuring that owning a property and choosing to let it out was a worthwhile venture.

And since then, the private rental property sector has gone from strength to strength in recent years, as property price inflation has reached dizzying levels and many would-be homeowners have been unable to get onto the housing ladder, increasing tenant demand.

However, as global financial volatility threatens to squeeze the UK’s overall property market, Mr Gordon argued that in reality, there are a number of separate housing markets that “differ from area to area”.

For example, the market in the north-east is distinctly different to the housing sector in London, he explained, suggesting that in the south-east in particular the private rented sector is being boosted by the number of people who are unable to get onto the housing ladder.

“The private rental sector soaks up a great number of young professionals,” Mr Gordon commented.

“In London, young professionals arrive and they cannot go to the public sector, so they have to go to the private rental sector,” he added.

Such a trend was confirmed recently by a report by Paragon which suggested that potential homebuyers are choosing to defer their property purchase decisions during the current financial climate and deciding to rent instead.

Nigel Terrington, the company’s chief executive, said that lenders are currently “handpicking” the customers they believe will pose the least risk, with rejected applications reported to have increased by 60 per cent in the last six months.

Such trends may provide buy-to-let investors with significant new opportunities, while the private rented sector is providing a suitable solution to people not yet ready to make that first step onto the property ladder.

Mr Terrington said: “The growth of the buy-to-let market has given these people more options – before it was either live at home or buy a property, even if it meant you were financially stretched, and we saw the consequences of that in the early 90s with mass possessions.”

The private rented sector now offers “good quality alternatives to house purchase”, he added.