Let and Live Let

02/05/2011

The UK housing market is undergoing a structural paradigm shift.  In five years’ time, one in five households will rent their house or flat, a sizeable hike from the current level of 16%. 

Not surprisingly therefore, the number of owner occupiers is likely to fall by more than one million in the same period, according to a panel of experts assembled by the Sunday Times (24.04.11).  Here at Census, we’re helping a range of clients, from first-time buyers, to property investors, address the opportunities and challenges this new dynamic is creating for them.

There are a number of interesting implications arising from this trend for our buy-to-let investors.  Foremost is the fact that we believe the future return will not lie, as it has done historically, in capital gains.  Rather, we’re encouraging our cash-rich investors to plan for long-term income growth.  In short - the property market is going to get more and more attractive for investors who are prepared to take a long-term view on what they think they’re going to get on their investment.

With banks and building societies struggling to find the capital needed to boost approvals, borrowers are likely to find it difficult to secure mortgages until at let 2014.  And a deposit of 20% is likely to become the norm for first-time buyers, forcing many to keep renting for longer.  This will force a greater reliance on private rented accommodation in the coming years.  However, a predicted lack of supply will push up rents and attract new investors into the market.

So what will this mean for first-time buyers looking to get into the market?  Falling house prices should have had positive repercussions for this sector.  But when the increased deposit needed for a mortgage is factored in, affordability for this market has not really improved at all.  This means that first-time buyers are getting older, and this is likely to increase, due to the time needed to accrue a 20% deposit.  

Paul Nevin 

Business Development