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The UK’s Private Rented Sector is now Worth More Than £1.4 Trillion


The UK’s Private Rented Sector is now Worth More Than £1.4 Trillion

With more first-time investors setting their sights on private rental properties than ever before, the total combined value of the sector has skyrocketed to an all-time high. According to Shawbrook Bank’s newly-published The Changing Face of Buy-to-Let report, the Private Rented Sector (PRS) in England, Wales and Scotland is now worth more than £1.4 trillion.

The figures from Shawbrook suggest that the sector has achieved growth of around 5.8% over the course of the past 12 months, despite record-high property prices in most key regions.

Since the first lockdown was imposed in the beginning of last year, house prices have bounced back at speed. In March 2021, average property prices were up a huge 9.9% compared to the same time a year earlier. By December 2020, average buy-to-let property prices had increased approximately 5.6% to reach a new high of £258,900.

A Turbulent Time for BTL Investors

The events of the past 18 months have prompted many BTL investors to rethink their strategies entirely, some having chosen to leave the market entirely and sell off their portfolios. Consequently, the total size of the PRS sector has shrunk over the past year, but all indications suggest the market will continue growing rapidly for the foreseeable future.

This is due in large to growing demand from private tenants, with more than 40% of landlords stating that they have seen significant increases in demand for their properties within the past 12 months. 67% expressed confidence in the future of the private rentals sector, with 34 per cent saying they intend to purchase at least one more rental property within the next year.

Record-high property prices are forcing many to accept the fact that they may never be able to afford their own home. When polled, almost half of all renters said they will most likely continue renting for the rest of their lives. A surprising proportion also said that they preferred renting due to the reduced responsibility it involves, while 7% said would continue to rent as it provides freedom of choice should they wish to relocate.

Continuation of Competitive Mortgage Rates

Speaking on behalf of Shawbrook Bank, managing director of property finance John Eastgate emphasised the effects ultra-low mortgage rates are having on the decisions of investors.

“Against the backdrop of the pandemic, the PRS has once again shown its strength and the important role it plays.  Landlords are looking to expand their portfolios due to the 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,” he said.

“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 home-ownership. 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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