PRS Growth Slowed, Second ‘Lost Decade’ Ahead For Nearly a Million First-Time Buyers

During the previous quarter of last year, the value of Private Rented Sector (PRS) in Great Britain failed to see an increase. House prices fell and the sector was unsuccessful in its growth. At present, the value stands at £1.4 trillion.

Effects of higher stamps duty costs, reforms to the tax treatment of mortgage interest, combined with the tighter lending rules are accountable for the halt.

The number of households in the sector upped by only 3% to 5.7 million, far slower than the rate of increase witnessed over the previous decade. In terms of the supply side, 1% more landlords increased their portfolios in the last three months, instead of shrinking it. This was according to a survey of 1,043 landlords, operated in association with BDRC Continental, the UK’s largest independent research consultancy. Meanwhile, UK Finance analysis data exhibits the figure of outstanding BTL mortgages, increased by just 1.5% a year. One sixth of the rate witnessed has slumped.


First-time buyer demand to sustain the PRS

While tenant demands for property have softened in recent months from the perspective of landlords, activity shown from first time investors remains a long way from the point of recovery to its pre-recession levels, despite government support measures. This has contributed to the long-term growth of the PRS and is set to do so in the future.

In the last decade, the PRS has seen a growth of 2.2 million households, accommodating aggravated buyers.

Fundamental demand for rental properties remains, due to first-time investors facing problems with affordability, rise in housing prices and insufficient house-building.


Landlords to bridge long-term gap

The market continues to professionalise as it bridges the supply gap, improving the service landlords provide for tenants as amateurs leave the market.

363,000 first-time buyers used a mortgage to buy a home last year and still 94,000 fewer than the typical number witnessed in the last ten years prior to financial crunch. Without an indication of recovery regarding first-time buyer activity, there will be far less first-time buyers being able to purchase their first property in the forthcoming decade in the ten years prior to the financial crisis.

This process has started and 31% of landlords are now generating a profitable, full-time living from investing in property. This is 5% more in comparison to the last three years when the figure stood at just 26%.

Kent Reliance data has revealed that in the beginning quarter of 2018, 72% of mortgage applications for purchase were via a limited company – more than twice the level seen two years ago, and up slightly from 70% in 2017.

Andy Golding, Chief Executive of OneSavings Bank, which trades under the Kent Reliance and InterBay brands in buy to let, comments: “Landlords were left reeling after the introduction of tighter regulation and higher taxes, while the spectre of Brexit is already weighing on the housing market. This has naturally deterred investment into the private rented sector, especially from amateur speculators.

“Political opinion may be set against the PRS, but without it, the housing crisis would be deeper still. First-time buyer numbers, despite recent fanfare, are a long way from pre-recession levels and with household numbers growing, and new housing starts inadequate, it is the PRS that will continue to pick up the slack. Policy should recognise that, and support growth in supply across all tenures.

“A housing market with dwindling supply of rental accommodation yet growing demand would, without a significant rise in affordable housing, provide the worst of all worlds for tenants: higher rents, with less choice and security, hampering their ability to save to buy a home.”


PRS Growth Slowed, Second ‘Lost Decade’ Ahead For Nearly a Million First-Time Buyers



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