Young investors set to fuel buy-to-let boom

Couple browsingMany young people may be struggling to get a foot on the housing ladder, but that does not mean that they do not recognise the potential benefits of investing in residential property.

Fresh research provided by letting agent Rentify shows that nearly half (49 per cent) of 18-39 year olds believe that acquiring buy-to-let property represents the best investment option in the UK today, with almost 4 million people in this age group actively seeking to buy an investment property.

With buy-to-let landlords having benefited from a booming property market earning returns of up to almost 1,400 per cent since 1996 – capital growth and returns combined – it is easy to understand why it is an investment type that appeals to many people across all age groups, not just the young.

George Spencer, CEO at Rentify said, “The fact that 49 per cent of first-time buyers would consider investing in buy-to-lets is fantastic and shows that there are more options out there and more people who want to get on the ladder.”

But-to-let continues to beat returns on all other mainstream investments, including commercial property, UK government bonds, shares and cash, and that trend looks set to continue, on the back of soaring demand from tenants.

The latest HomeLet Rental Index revealed that overall rent price increases were running ahead of inflation and house price growth to hit an all-time high of £977 per month in July, up 11.8 per cent year-on-year, helping to ensure that many investors are continuing to rent out their homes at a healthy profit.

The latest buy-to-let index from Your Move and Reeds Rains shows that the gross yield on a typical rental property in England and Wales increased to 5.2 per cent in July, up from 5.1 per cent the preceding month and 5 per cent in July 2014.

The data also revealed that a typical landlord achieved overall returns of 8.7 per cent, on average, over the year ending July 2015. Although this marks a significant drop from the 10 per cent recorded in June and 12.5 per cent in the year ending July 2014, it remains considerably higher than all other investment assets in today’s market.

With attractive rental returns still achievable, the reality is that an increasing number of people will continue to enter the private rental sector, as buy-to-let consolidates itself as the investment of choice, partly due to the dismal returns savers are currently receiving from banks and building societies.

Charlotte Nelson, Finance Expert at Moneyfacts.co.uk, said: “With high rents and poor savings rates, it’s little wonder that the buy-to-let market is booming.”

In light of this increasing demand, buy-to-let mortgage product numbers have soared to more than 1,000, up from 460 products available just two years ago, according to data from Moneyfacts.co.uk.

“The boom in deals has undoubtedly been boosted by providers taking advantage of the new demand from thousands of pensioners making the most of the new pension freedoms,” Nelson added.

Source: Property Drum

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