The anniversary of buy-to-let sector was 15 years old on 24 September 2011 having been launched by the Association of Residential Letting Agents (ARLA) back in 1996 at the RAC Club, Pall Mall.
Buy-to-let was developed in response to the surge in demand for rented property following the recession of the early 1990s. The sector quickly developed and became a popular investment product for first time property investors as well as professional landlords.
Nigel Terrington, chief executive of Paragon Group, explains: “Buy-to-let has galvanised the rental market over the past 15 years, whilst providing an attractive asset class for property investors. Buy-to-let finance was the catalyst for the revitalisation of the modern private rented sector.”
“Many argue that the PRS would have died without buy-to-let; it had fallen to around 7% of all housing by the early nineties and there was a lack of finance going into the sector. The PRS now provides a home for nearly one in six households and its importance will increase in future years as population growth and housing completions diverge.”
The number of properties in the PRS in England has risen from 2.1 million in 1996 to 3.9 million in 2010 while the value of buy-to-let balances has risen from £5.4 billion in 1999 to £154.5 billion in 2011.
The UK’s biggest house builder, Barratt, has seen a 25% increase in sales to investors in the first half of this year compared to the same period in 2010. And a report by the Council of Mortgage Lenders and Paragon Mortgages highlighted increased activity in the buy-to-let remortgage sector between the first and second quarters of 2011.
In addition to the increased activity in the sector, rents rose by 1.2% in August this year, according to the latest Buy-to-let Index from LSL Property Services plc with average rents across England and Wales standing at around £713 per month, compared to £705 in July.
Ray Withers, director of UK buy-to-let property investment firm, Property Frontiers, commented: “Nowadays more and more people are choosing to live in rented accommodation which in turn has been pushing up rental demand.
“This has of course pushed up confidence among buy-to-let investors and with rental prices rising, around 78% of investors are now looking to buy additional investment properties next year to take advantage of rising rental values.”