After almost 20 years of growth, the buy-to-let sector has seen its first dip in rental property numbers as more landlords begin to offload some of their assets. While the reasons behind this are complex, build-to-rent could now begin to flourish.
Tax reforms, stamp duty and new lending rules have all been thrown at the UK’s private rented sector over the past two years, but overall the market has remained hugely resilient as demand for rental properties continues to peak. The latest figures from the Ministry of Housing, although showing a downturn as an estimated 3,800 landlords a month sell up, are not as straightforward as they seem.
Why are the numbers really falling?
One reason for the slight drop in numbers could be put down to rental property owners offloading the least profitable items of stock in order to focus their funds on the better performing properties. This is particularly the case in London, as house prices have begun to level out.
Some investors may also be looking into alternative investment types as the market continues to change. The fact is that Generation Rent isn’t going anywhere, but the demographic is changing and new trends are coming to the fore which savvy investors are adapting to.
One such trend is the booming build-to-rent market. The government has already pledged to invest £1m in build-to-rent developments as part of its mission to cut the country’s housing shortage, while last year there was a reported £2bn of investment in the space.
A new generation
The new generation of renters is increasing in age, as homeownership becomes less of a priority for youngsters, and rising numbers of families as well as older generations and even retirees are choosing the flexibility of renting as opposed to owning a home. With higher levels of affluence in the private rented sector comes higher demand for facilities and added extras, which are provided by the new build-to-rent developments being created.
Swimming pools, gyms, concierge services, recreational spaces and homeworking hubs often come built in, creating communities in a way that the old buy-to-let market sometimes didn’t, while smart home technology is also being fitted into many new-build developments. Although these luxuries can come with an extra 10% price tag for renters, it is an increasingly popular lifestyle choice.
For investors looking to diversify, buying an off-plan, new-build property that is designed for renting means that a lower entry price is paid, but future yields can be significantly higher than traditional lettings.
BuyAssociation offers a number of off-plan developments, which offer attractive average yields for investors, including build-to-rent opportunities.