Private rented housing sector value jumps 5.8% to £1.4tn

The value of the private rented sector in Britain rose 5.8% in the past year to £1.4tn, according to a bank’s report.

House prices have soared 9.9% between March this year and the start of the pandemic, helped by the stamp duty holiday, Shawbrook Bank said.

This included a 5.6% rise in the value of the average buy-to let property across the UK to December 2020, sitting at approximately £258,900 for each home.

But despite the rise in value, the size of the private rented sector shrank over the past year with some landlords choosing to leave the market, according to a report for the bank called The Changing Face of Buy-to-Let.

It also found that many tenants made a change, opting to return to their family homes during the pandemic, to leave cities in search of more space, or to make the most of the stamp duty holiday and become homeowners themselves.

As restrictions have eased, remaining landlords said demand has increased in the past 12 months by 42%, and two thirds said they were confident about the future of the property market over the next 12 months.

Around a third also said they are planning to buy another property in the coming year, especially as those not on the housing ladder are likely to stay in rental accommodation for longer.

The report found that half of renters say they expect to be renting for the rest of their life, with affordability one of the main reasons.

Around one in 10 said they prefer the reduced responsibility of renting, while a further 7% said that renting allowed them to live in a better location than if they bought.

When asked why they were confident about the future of the property market, 41% of landlords pointed to house price growth and an increase in demand from tenants, 33% highlighted the general strength of the economy and 26% raised the increased rental yields currently available due to low interest rates.

Shawbrook Bank’s research also found the highest rental yields can be found in Scotland at 5.8%, the North West at 5.5%, and Yorkshire and the Humber at 5.4%.

In comparison, while London may generate the highest rents, yields for London buy-to-let properties are currently among the lowest at 3.9%, below the UK average of 4.3%.

John Eastgate, managing director for property finance at Shawbrook Bank, said: “Against the backdrop of the pandemic, the private renting sector has once again shown its strength and the important role it plays.

“Landlords are looking to expand their portfolios due to a combination of rising house prices, attractive yields and growing demand from tenants.”

He added: “While more first-time buyers have stepped on to the property ladder in the past year, the reality is that rising house prices mean more will continue to be locked out of home-ownership.

“This, coupled with disruption to employment and lagging wage inflation, will make it difficult for some to buy their own home.”