Landlords made £112bn in the year to the end of March - an average of over £24,000 each

 

House for rent – Why do estate agents describe a flat as a good buy-to-let investment?
Landlords in Britain now own 25pc of the private housing market according to a new report. 
 
Buy-to-let owners pocketed £112bn in the year to March 2015, as baby-boomer wealth continues to be ploughed into the lettings market.

Landlords are banking almost £4bn a month in income from their rental property as the average monthly rent grew by 3.9pc in the first quarter of the year to £832 - the biggest jump since the autumn of 2013, according to a new report from Kent Reliance. 

In the year to March the average property generated a return of £24,221 in rental income and capital gains - just £1,000 less than the average salary, the study showed. However, this does not include any mortgage payment that would have to be paid or tax. 

chart

As house prices rise and mortgage lending gets tighter for first-time buyers, baby boomers, who have seen the value of their family homes increase by an average of 200pc since 1991, are releasing cash by downsizing. Many are piling some of that into the rentals market. 

New rules on pension freedom, which were introduced in April, have made it easier for people to take release lump sums at retirement. Again, much of this money is being reinvesting in bricks and mortar. 

 

Just how big is the rental sector? 

The value of property held by British landlords grew from £262bn in 2001 to £990.7bn at end of March 2015. It is expected to crash through the £1 trillion threshold in the next four weeks, according to the Council of Mortgage Lenders.

In 2001, buy-to-let investors held 16pc of the private housing market; they now own 25pc, according to research by the savings, investments and mortgage lender, Kent Reliance. 

The rental sector grew by nearly 150,000 homes in the 12 months to March taking the total to 4.8m - 18pc of all households in the UK. The number of rented homes (excluding social housing) is expected to reach 5.5m by 2020, the report showed. 

Andy Golding, chief executive of OneSavings Bank, which owns Kent Reliance, said: “Buy-to-let has come of age, moving from a niche asset class to one big enough to rival the stock market. Landlords are seeing the benefit of a structural change in Britain’s housing market, with tenant demand ever strengthening. 

"Yes, house prices are showing signs of steadying somewhat, but growth remains brisk. Long-term price inflation is not in danger, given the gaping chasm between growing demand for housing and the number of houses being built each year. Combined with the dearth of high loan-to-value lending to first-time buyers, this will continue to buoy demand for rental accommodation, as well as landlords’ returns, and the sector will continue to expand." 

The availability of mortgages to landlords is also improving, the report claimed. 

 

How much do landlords make? 

chart-2

• In the year to March the average property generated a return of £24,221 in rental income and capital gains - just £1,000 less than the average salary. 

• Across Britain as a whole annual returns enjoyed by property investors totalled £111.5bn. Of this, £67.2bn came from capital gains and £44.3bn from rents. 

• The sector’s value is now equivalent to 43.1pc of the value of the UK’s stock market, up from just 12.2pc fifteen years ago. 

 

The best yields and annual returns in the country 

chart-3