Huge surge in buy to let forecast for next seven years

17th May 2018

The latest major piece of research into the private rental sector is forecasting a huge surge in demand - meaning there will be six million households renting by 2025, a significant increase on the current figure.

Hamptons International says that despite the recent additional homes stamp duty surcharge and the phasing out of mortgage interest tax relief on investment properties, the buy to let sector is destined to grow considerably by 2025.

Between April 2016 and 2017 the number of households renting increased by 164,000, some three per cent more than 2016, says Hamptons.

By 2022, 20.5 per cent of households in Britain will be privately renting, up from 19.4 per cent today. By 2025 the sector will reach six million households - around 22 per cent of the total.

In an extensive piece of research, the agency also notes that cash purchases are becoming increasingly important in the sector, insulating it from regulatory and tax changes. Some 65 per cent of investor purchases were made with cash in 2017 adding up to £21 billion worth of property. 

The agency admits that strong house price growth has shrunk yields for new buyers, especially in the south of England, but insists that “buying wisely” brings benefits. 

So for example, average yields in London are 5.4 per cent compared with 7.9 per cent in the North West, yet 20 per cent of London landlords achieve higher yields than their North West counterparts because of a more strategic choice of the property type and location in relation to demand in a particular suburb or neighbourhood.

Hamptons also says that on average, landlords selling in 2017 made a total gross return of 69 per cent over 8.5 years; some 60 per cent of that return was from rental income and 40 per cent from capital appreciation. 

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