Over the last few years several things have coincided to boost the market for private residential property investment:
- The performance of the stock market has been relatively poor over the last decade. Here’s a fact you’ll very often hear quoted. On January 1st 2000 the FTSE stood at 7,000. Today, as I write, more than 13 years later it stands at just over 6,000.
- Other alternative investments are also performing badly. With UK base rate at ½% for over 4 years and destined to stay low at least for the next few years, holding cash is very inefficient.
- A consequence of poor stock market performance and low returns (interest rates) on cash, plus other negative factors, private pension schemes have been performing. To many people, property is now seen as a better performing alternative.
- Low interest rates allow effective “gearing” through borrowing.
- Government policy appears to be to move towards the provision of “social” rented housing through the private sector.
- There has been an increase in (legitimate) migration into the UK from an expanded European Union, increasing demand for short-term, rented accommodation.
- Changing social trends have resulted in a large number of smaller households and a larger number of singles living alone. This trend is set to continue with the number of households in the UK predicted to increase from 21 million to 26 million by 2020. We are told that many of these extra households will want to rent and not buy.
- Unlike other European countries the population of the UK is still growing and is predicted to increase from 58.8 million in 1996 to 62.7 million in 2016, and around 70m in 2030, and these extra people will need housing.
- And finally, possibly as a short-term trend although this is not certain, the lack of available credit following the financial crisis of 2007, and stricter bank lending criteria (the credit crunch) means many more people, especially first time buyers, are forced to rent and can’t buy.
Together these trends:
- Have increased the popularity of property as an investment;
- Suggest that the rental market in the UK has not peaked.
- Suggest that, in the absence of Government and political interference, there is scope for further expansion of buy-to-let investing.
All of this is excellent news for existing and prospective property investors.