Immigration and housing downturn spell good news for buy-to-let
Released on: November 14, 2007, 5:21 am
Press Release Author: Jim watson
Industry: Real Estate
Press Release Summary: The issues of immigration and housing have been big issues in the news in recent years, with both being bones of contention and debate.
Press Release Body: The issues of immigration and housing have been big issues in the news in recent years, with both being bones of contention and debate. In the former case, there has been a split between those who have welcomed the new source of labour coming from eastern Europe, set against those claiming that a crowded island is somehow being swamped or simply displaying xenophobia. In the latter case, there is widespread concern over the housing crisis but no clear agreement over the solutions or who is to blame.
What is undeniable is that the two issues have some connection, with the increase in the UK population to top 60 million for the first time meaning that more homes, be they owned or rented, would have to be found. Whatever the wider debates about immigration and economic issues, this has undoubtedly proved a boon for buy-to-let homes as many if not most of those coming to the UK will not have done so with the intention of settling permanently, with some only in Britain on short-term visas.
This point was made by Nigel Terrington, chief executive of Paragon Mortgages, who, writing for This is Money, said: \"The extra 1.1m foreign nationals working here place additional pressure on our finite housing stock and particularly on the private rented sector.\" He added that this factor alone represents an additional 3.5 per cent of demand for rented property.
However, Mr Terrington added, there are other contributors to the level of demand, not least the impact of the housing market downturn, saying: \"The period of strongest growth in the private rented sector was not, as many might expect, the past few years, but rather the period between 1989 and 1994.\" During this time, he noted, there was a 16 per cent increase in private renting.
This, of course, was the period when the UK economic cycle moved from the inflationary boom of the late 1980s into 1990s bust, with a recession and collapse in the housing market. Mr Terrington emphasised that while the situation is unlikely to be repeated because the economy is sounder now, the lower level of confidence could again work in favour of the buy-to-let landlords.
Such a view is also favoured by financial brokers Moneygate. In a statement today, the firm said that, far from facing doom and gloom because of the housing downturn, buy-to-let in Britain was well placed to do well. The company cited lower repossession rates, plus the higher income and broad asset base of experienced landlords as reasons for lenders to retain more confidence in buy-to-let investors than in ordinary residential mortgage seekers. . In addition, the firm added, there was \"strong evidence\" that rents were rising \"sharply\" and would continue to do so as the situation unfolded.
Thus, the firm concluded: \"Despite predictions of doom and gloom in the property market, the buy-to-let market looks set to continue bucking the trend with predictions of up to 15 per cent growth over the next year.\"
While the initial wave of immigration that came when Poland joined the European Union may have subsided, with most Bulgarians and Romanian emigrants heading to southern Europe, the downturn factor is becoming increasingly prominent. Buy-to-let investors will still have plenty of reason to be optimistic as a result.
2022
