It would seem that now is a better time than ever for investors to join the buy-to-let market.
The Royal Institute of Chartered Surveyors (RICS) recently announced that rents have been on the rise for 10 consecutive months and are predicted to rise a further 3.0% next year.
Simple economics should not be overlooked when discussing this trend; we’re in a housing crisis, it’s unlikely that the supply of rental properties will meet demand in the near future; therefore the price of rental properties will rise and should continue to do so.
However, there are slightly more complex factors that are changing the dynamic of the rental market, changes that are likely to ensure the increasing rate of rent continues, especially in affluent parts of the country.
In London and the South East house prices have increased by 42% since 2012 yet, over the same period, rents have only increased by 19%.
This difference in growth has caused a situation where many tenants are now renting more luxurious homes than ever before, as they have found themselves priced out of the ultra-prime end of the sales market.
This has led to an ageing population of renters across the UK, with those over the age of 30 now making up almost 60% of the renting demographic.
Last year, average renters buying a home did so in places where house prices were roughly £35,000 less than where they were renting. In London the difference was £93,000.
This statistic helps to shed light on why this older generation with families are currently the fastest growing demographic of tenants.
Simple supply and demand analysis bodes well for property owners all across the UK but as house prices rise, the changes to the demographic of renters means that landlords are dealing with an older, more affluent client, with more disposable income and a higher standard for their rental accommodation than the first time renter.
*John Fisher is Head of Lettings at Sotheby’s International Realty