How cultural changes are driving the buy-to-let market

Dev Malle, sales and marketing director at Personal Touch Financial Services, discusses why buy-to-let has become such an important part of the UK market.

Over the past few years, landlords have embraced buy-to-let as an investment opportunity, but it hasn't always been that way.

In the past, the idea that a British man's home was his castle, and Margaret Thatcher's right-to-buy scheme added to a general attitude that owning your own property was something everyone should, and could, aspire to.

Over the last two to three years in particular, however, economics have combined with social policies to create an environment that has made renting a more culturally acceptable lifestyle choice.

Demographic trends have played a major role in the changing status of renting a property - the profile of the would-be homeowner has shifted.

Our increasing divorce rate, more mobile labour force and later marriages have all had a real impact. In the past, a separation, a job move or single status would have forced the decision to rent, but now, there is less pressure to get on the property ladder. This social shift has been compounded by the financial impact of lending policy.

It is no secret that since the onset of the financial crisis, first-time buyers have needed significant deposits, and, if they don't have the good fortune to be able to access family funds, their opportunities are limited.

Even if they wanted to buy their own property, many have not been able to.The more people have come to accept renting as a part of our culture, the greater demand has been in the sector; and the greater the demand, the more sustainable the sector has become.

Any stigma that might have been attached to renting has virtually disappeared - through work and leisure, people have been exposed to European markets, such as France, Spain and Germany, where renting is the norm, and have recognised the benefits and flexibility that it can bring.

Going forward, the likelihood is that buy-to-let will continue to see growth. Landlords are looking at relatively low house prices compared to a few years ago, while rental yields and returns are moving steadily upwards.

And despite the rising cost of renting, home ownership is at its lowest level for two decades, with analysts now suggesting a new boom in private rental.

We are already starting to see the signs. At the peak of the market in 2006/07, for example, 18 per cent of our members' business was buy-to-let - and in December last year, we saw levels return to that level.

Those lenders and brokers with expertise gained before the recession hit the market will be able to adapt easily, working with both established players and new entrants and developing partnerships that will benefit borrowers, landlords, brokers and lenders.

We are well placed to evolve along with our changing society, taking advantage of the increasing demand coming from professional and experienced landlords who are looking to establish long-term business-to-business relationships with advisers.