Buy to let is still an attractive investment compared to other asset classes but to make the best of the opportunity more investors are choosing cheap high-yielding properties.
A report commissioned by The Mortgage Lender and written by Halifax housing expert Martin Ellis says the private rented sector has grown strongly over the past decade.
Some 20 per cent of households – that’s around 4.7m – now rent privately.
Of 25 to 34-year olds, 46 per cent live in the private rented sector – almost double the percentage in 2006.
There has also been a huge increase in the proportion of 35 to 44-year olds in the private rented sector over the past decade, rising from 11 per cent to 29 per cent.
There was, however, a significant fall in the number of BTL property sales following the introduction of the stamp duty charge for additional properties in April 2016. BTL house purchase declined sharply immediately and has remained roughly flat since then.
Buy to let house purchase activity in 2017 was more than a quarter lower than in 2016 with BTL purchases made with a mortgage averaging 6,240 a month in 2017 compared with 8,500 in 2016. In value terms, BTL house purchase lending fell by 28 per cent in 2017.
There has been a further weakening recently with the number of BTL house purchase loans in the first three months of 2018 totalling 11 per cent lower than in the same period of 2017.
Even so, the BTL mortgage market now represents nearly 13 per cent of new UK mortgage lending with, the report claims, more enthusiasm for buying low priced properties with proportionately higher yields.
The market grew from 840,000 BTL mortgages outstanding with a total balance of £93.2 billion at the end of 2006 to 1.8m BTL mortgages with an aggregate balance of £214 billion by the end of 2015.