Growing obsession with buy to let

The term 'buy to let' has become synonymous with the private rented sector and for some, carries with it negative connotations. But in a new Housing Intelligence report published by property website, Hometrack, Richard Donnell, Director of Research, argues that concern over the impact of buy to let investors is in danger of suppressing any debate about the role that the private rented sector can play in balancing housing supply and easing affordability pressures.

In the face of increasing house prices, pressure on the private rented sector is set to grow. Affordable housing offers a solution for some, but the importance of the private rented sector is simply too important to ignore.

Hometrack calculates that some 70% of private rental tenants are effectively trapped, unable to access owner occupation. In the long term it estimates there will be demand for an additional 600,000 private rented homes by 2021, requiring £100 billion of new investment.

Donnell comments, "Our analysis shows that the private rented market we have today has simply become an extension of the affordable housing sector.

"It's interesting to note that despite the recent buy to let boom, privately rented homes let on the open market account for just 8% of supply in England. The key challenge here is how to stimulate a long term and sustainable increase in the supply of rented homes in those places where they are most needed."

He adds, "What the market really needs is the development of bespoke rented housing designed to meet the needs of renters and which will remain in the sector over the long term."

In the long term institutional investors may provide the answer but the supply itself is likely to originate from the development market. Donnell adds that when it comes to housing, planners have tended to think in terms of the overall split between 'private' and 'affordable' housing. It is time they began considering the split between housing for purchase and rent in both the private and affordable housing markets.

"This may be an argument that goes against the grain of current thinking, particularly at a time when there is much discussion about controlling the impact of investment buyers on new developments," he notes.

Donnell concludes that encouraging the development of bespoke blocks of rented housing held for the long term by institutional investors will undoubtedly help boost the rental market in a sustainable manner. But it is vital that concerns over the activities of private investors do not distract attention from the bigger picture.

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2007-07-16 10:06:47 © Moneyextra.com