Buy to let is here to stay and short-term measures like the government’s new help to buy scheme will not change the market, according to new research.
Home ownership started shrinking in 2001 and has continued to waste away ever since, says a study by property consultants Savills.
By 2011, the number of buy to let properties soared from 2.3 million to 4.3 million, and is expected to grow at a rate of 200,000 a year in the foreseeable future, said the firm.
By 2018, claims the report, 20% of all homes in England – which adds up to around 5.7 million – will be owned by property investors.
“This structural shift in the housing market, which started in the early noughties and pre-dates the credit crunch, is set to remain,” said a spokesman for the firm. “We expect the private rented sector to swell by about 200,000 households a year over the medium term despite recent Government measures to boost homeownership.
“Help to buy may encourage more buyers onto and up the property ladder in the short-term but it will not change the direction of the market. Key drivers point to continued demand for private renting in the long-term.”
The study highlights underlying market forces will continue to aid investors.
In 2011, median houses prices were 4.5 times median earnings, the report points out, while the gap between prices and earnings has grown to 6.7 times in the intervening period.
“Mortgages are more available, but at higher loan-to-values, buyers still need large deposits. The average first time buyer requires a deposit of £27,000 equivalent to 77% of their income. In London, the average first-time buyers must save £63, 000,” said the spokesman.
“The cost of monthly mortgage payments is another barrier. Banks’ more cautious approach to lending means interest-only loans are now rare. Paying off the capital as well as the interest, makes the average mortgage more expensive to service than paying rent. This cost can only rise.”
The report also cites a rising population and a shortage of homes as other factors supporting buy to let.
In Birmingham, Leeds, Manchester, Liverpool and Bristol, the number of houses in the private rented sector has risen by 77% in the last decade, says the firm.