Despite the huge growth in buy-to-let, the private rental market is ‘inactive’ in three-quarters of Britain, lenders have been warned.
Property analyst firm Hometrack says the rental market is not working properly in much of the country, making it unsuitable for investment.
The warning – for lenders, buy-to-let investors and also developers looking at ‘build to let’ schemes – comes after Hometrack research showed that 75% of lettings last year were concentrated in just 25% of the country.
A Hometrack map which divides the country into ‘mature, ‘active’ and ‘inactive’ markets shows that in most of the West Country, parts of East Anglia and the tip of East Sussex, the rental market is inactive. It is also inactive in virtually the whole of Wales, in Scotland outside the cities, and throughout the North-East.
Active and mature markets have been identified throughout London, the South-East and midlands.
However, by geographical area only 7% of the country has a mature rental market, generally in urban areas and often in university towns.
Inactive markets – where rental demand is lowest and landlords are at risk of long voids –are spread across 71% of the country and account for 38% of Britain’s private rental housing stock.
Richard Donnell, research director at Hometrack, said: “These are important considerations for developers, local authorities and investors to be aware of when looking at local housing needs and when setting rental levels.
“Our analysis shows that there is little point in building homes to rent in locations where a viable rental market simply doesn’t exist.”
Hometrack does, however, acknowledge that the private rented sector has grown at a ‘staggering’ rate. In the last five years, it has increased faster than at any point over the last two decades. Although buy-to-let has fallen in number from the height of the market in 2007, when buy-to-let landlords represented 11% of all transactions, buy-to-let lending has been rising again.
According to the Council of Mortgage Lenders, in the third quarter of this year buy-to-let lending was up 8% on the previous quarter.
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Comments
Lots of properties were built in lots of places where they really shouldn't!
Ireland has loads of half finished "Ghost Towns" for example.
The problem is similar in the UK with an oversupply of properties in areas where there are no jobs.
They were built on the expectation that the bubble would continue forever.
Councils wanted it because they wanted to make there area better than their neighbours.
Builders are just after the money - and while the bubble lasted everything was cushty.
The poor home owners in and near the development of course are now screwed.
I didn't question the accuracy of the report, more the need for it.
Do we really need a report to confirm that areas of low population don't have a high need for accommodation, its pretty obvious to anyone in the industry isn't it.
Propery Troll & Ray Both of you obviously do not operate in an area with an oversupply of New Build, closures of businesses and high unemployment. This report is spot on a far as I am concerned.
Demand for housing is reflective of the density of population and the employment levels in an area. This is true in both Home ownership, RSL and PRS. Really this is a non story. There are still more tenants than properties available in most areas.
Who would have thought that areas that have more people would have more demand for accommodation.
Coming in next weeks Tales of the Bleeding Obvious; proof that the world IS flat