Value of the PRS grows to £1.4 trillion

The value of the private rented sector (PRS) in England, Wales and Scotland grew by 5.8% to £1.4 trillion in the last year according to a new report from Shawbrook Bank.

‘The Changing Face of Buy-to-Let’ report — which surveyed 1,000 landlords and 1,000 private tenants, along with detailed analysis of ONS data — found that the value of the PRS continues to rise, driven by a boom in house prices as a result of the stamp duty holiday and continued low supply. 

It revealed that the value of the average BTL property across the UK grew by 5.6% to December 2020 to approximately £258,900. 

In total, 42% of landlords have seen demand increase for their properties in the past 12 months, and two-thirds (67%) are confident about the future of the property market over the next year, with one-third (34%) planning to buy a property in the same period.  

Shawbrook research revealed that the highest rental yields can be found in the North West (5.5%), Yorkshire and the Humber (5.4%) and Scotland (5.8%). 

In comparison, while London may generate the highest rents, yields for London BTL properties are currently among the lowest at 3.9%.

“Against the backdrop of the pandemic, the PRS has once again shown its strength and the important role it plays,” commented John Eastgate, managing director of property finance at Shawbrook.

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

“Borrowing to help fund this expansion is an attractive option, with landlords presented with great choice and historically low mortgage costs.”

The bank’s report highlighted that remortgaging levels are expected to grow by 4% this year as the possibility of rising interest rates prompts more landlords to secure a fixed rate. 

Looking at tenant trends, the paper found that almost half (49%) of renters expect to be renting for the rest of their life, with affordability being one reason behind these figures. 

However, a growing number are also choosing to stay renting; more flexible lifestyles have led to some looking for the same from their property. 

Some 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.

More than half of renters said they would be prepared to pay more money if the landlord undertook a renovation of the property. 

When asked why they were confident about the future of the property market, landlords pointed to house price growth (41%), an uptick in demand from tenants (41%), the general strength of the economy (33%), and the increased rental yields currently available (26%).

“While more first-time buyers have stepped onto the property ladder in the last year, the reality is that rising house prices mean more will continue to be locked out of homeownership,” John added.

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

“In addition, with more choosing to rent for the flexibility and freedom it offers, there is a clear need for professional landlords who can offer high quality accommodation.” 

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