Buy-to-let market 'buoyant'

The UK's property rental market has continued to grow thanks to strong investment in the buy-to-let market and a more European attitude to renting, according to the lender UCB Home Loans.

UCB, Nationwide's self-certification lender, said investment in rental property is now being seen as a suitable long-term investment to pensions.

"Hardly anyone apart from professional landlords invested in property a few years ago, but it's now becoming the norm for an increasing number of ordinary people," said managing director Charles Reed.

At the same time, the group says British attitudes towards renting are changing.

"Choosing to rent is becoming more acceptable for a wider group of people," said Mr Reed.

"At 69%, the UK's level of home ownership is relatively high, but perhaps we're now becoming a bit more European in being more relaxed about renting."

Corporate slowdown

UCB's report cites figures from the Council of Mortgage Lenders (CML) showing the value of buy-to-let lending totalled £6.7bn in the last six months of 2002, compared with £5.5bn in the first half of 2002 and £4.1bn in the second half of 2001.

The trend for people to stay single for longer has meant there is growing competition for property Charles Reed, UCB Home Loans

"Rapid house price increases have spurred interest in the buy-to-let market," said the report.

Its report also suggested interest in the buy-to-let market had "rippled out from areas in the south and is now strongest in more northern areas where house prices are increasing more quickly".

UCB suggested demand remains strong in the private lettings market, while corporate lets are suffering, primarily due to economic changes.

According to figures from the Royal Institution of Chartered Surveyors, the number of private lets in the UK has risen from 74% of the total market in January 2001 to 82% in recent months.

At the same time, a weaker economy has knocked corporate lettings from 15% to 9% of the market in the same period.

Thorough research

The UCB report suggests low interest rates and ongoing pension concerns will keep the rental and buy-to-let sectors buoyant.

It recommends landlords entering the market should do their research thoroughly and expect to calculate their return over 10-15 years.

"With more new landlords entering the market, there is beginning to be greater competition to find tenants in some areas," said Mr Reed.

At the same time, he said changing demographics were good news for landlords.

"The trend for people to stay single for longer has meant there is growing competition for property, particularly smaller homes." The return on a property varies between regions, but the report suggests landlords can expect between 7% and 9% in more active parts of the country such as Bristol, Northampton, Leeds and Manchester.