Expats banking on buy to let to grow their wealth are likely to see the private renting market expand to one in four homes within four years, according to a new survey.
Around 5 million homes are already let to private tenants – which is a fifth of all households in the UK.
This is set to rise to 5.79 million or 25% of households by the end of 2021, says a detailed assessment of the buy to let market from property consultants Knight Frank.
The main reason for the expanding market is that an increasing number of tenants cannot afford to buy a home of their own as property prices keep rising but wages fail to keep pace, which means they cannot save for a deposit on a home of their home.
The number of buy to let homes has doubled in a decade buying a home remains out of the financial reach of most people aged less than 35 years old.
Tax assault on private landlords
But the report says the underlying structure of buy to let is about to change.
Government policy to increase taxes and the cost of buying letting property for private landlords will discourage them from expanding their portfolios, while build to rent corporations move in to take up the slack in the market.
“Younger workers especially are taking advantage of the increased flexibility of renting as a tenure which allows moving between locations without any of the costs associated with buying or selling a property,” says the report Multihousing 2017.
“Affordability constraints in the sales market are also curtailing some tenants’ plans for house purchase, resulting in a longer stay in the PRS as they save for a deposit.”
Affordability is top priority
The report highlights the rise of corporate landlords professionally managing purpose-built homes.
The market is now worth £25 billion from a standing start a few years ago and is expected to reach £70 billion by 2022.
The report also holds a wealth of information about private tenants for landlords showing their priorities on seeking a property.
Top of the list is affordability – with 63% of renters setting a budget. Next comes location, with 24% wanting to be close to transport links, family, friends, green space and schools. Property size matters to 8%.