Things have been moving quickly in the UK buy-to-let property market, with more long-term renters pushing up the figures as the sector swells.
New research has revealed the full extent of the growth in the country’s rental sector, which estimates that around 8.7 million homes are now rented privately.
The study by Octane Capital puts the UK in fourth position in the world in terms of the size of its rental market. UK buy-to-let only falls behind the US, Germany and Japan in terms of the number of rented homes it contains.
This is based on Octane’s estimations that there are currently more than 29.5 million homes in the UK. Its research looked at number of dwellings, proportion attributed as private rentals and how this then equates to the total number of rental homes.
Learning from US, Germany and Japan
The countries which pipped the UK to the post have colossal rental markets. While in the UK, homeownership is touted as the ultimate goal, this seems to be less the case in other parts of the world, with renting into old-age a less remarkable choice.
The US has around 139.7 million dwellings, says Octane, and a huge 47 million of these are in the private rented sector. Germany has around 20 million privately rented properties, while Japan has an estimated 8.7 million.
As Jonathan Samuels, chief executive at Octane Capital, points out, the UK buy-to-let sector could see a growing number of life-long renters as attitudes and lifestyles change.
“We could see the UK start to catch the other frontrunners as long term renting becomes more prevalent as a lifestyle choice,” he says.
“This is already a commonplace occurrence in nations such as Germany where nearly half of all homes are privately rented in order to satisfy this demand. Should we see a similar trend emerge in the UK, there’s no doubt that the buy to let sector will continue to swell in size.”
The value of UK buy-to-let
With privately rented properties accounting for around a third of all homes in the UK, they are clearly crucial in providing accommodation for many thousands of tenants. Many, says Samuels, have been priced out of homeownership due to high prices.
The company also released research last month which added a price tag onto the current UK rental market. Based on stock levels right now, Octane believes UK buy-to-let is now worth around £1.7trn – an increase of £239bn over the past five years.
Due to the fact that this is based on property prices, it is not surprising that London holds the most value in its rental homes, worth around £500bn. The capital is a hugely popular renting hotspot, and accounts for around 19% of all privately rented properties in the country, says Octane.
Thriving in adversity
Samuels believes that the sector has faced some difficulties in recent years, with the government trying to “dampen investment” by reducing tax relief, increasing stamp duty and changing tenant fee rules. Covid, he adds, has also affected some landlords with longer void periods.
But he adds: “Despite all of this, the sector has stood tall and continues to provide the vital rental market backbone that so many are reliant on.
“At the same time, the nation’s landlords have benefited from a considerable level of capital appreciation on their buy-to-let investment and the value of the sector as a whole has increased substantially.
“Let’s just hope that whisperings of a higher rate of capital gains tax remain just that, as any further increase could spur a reduction in available stock, causing the total value of the market to decline in the process.”