For the first time in two years, landlords are buying more homes than they are selling. Developers are also opting to let rather than sell properties. Are landlords foolhardy and developers desperate? Or does the data suggest that demand for rentals is set to rise as a result of the mortgage famine and an increasing realisation among twentysomethings of the benefits of being a tenant? Below we answer your questions: I thought that there were too many properties to let... That is certainly the case in many areas, but there are signs of change: studies indicate that there could be insufficient properties to meet demand, with long waiting lists for social housing - the result of rising repossessions - and home ownership remaining out of reach for many young people. First-time buyers may find it even more difficult to secure a mortgage if the Financial Services Authority bans 100percent mortgages and caps home loans at three times a borrower's income, as has been hinted. A report last year by Centre for Cities, the think-tank, found that by 2021 one in five homes will need to be a rental property to meet demand. Richard Donnell, Hometrack's head of research, says: “There is certainly a role for a larger rental sector. Over the past few months rents have begun to climb again in some areas as many would-be buyers turn to renting. This is only going to increase as fewer and fewer people can actually afford to buy.Is the downturn to blame? Home ownership was in decline even before the housing crash. The proportion of households in England owning their own home fell from 70.9 per cent in 2003 to 68.3 per cent in 2008. Donnell adds: “People's expectations have changed. They still aspire to buying eventually but they no longer expect to do so in their twenties. They, and the lenders, have also now realised that when there are 67,000 repossessions predicted this year alone it just isn't responsible to get on the housing ladder at any cost.” How do we compare with the rest of Europe? The UK has the second-highest percentage of owner-occupation in Europe at 68.8 per cent (Spain has 82 per cent). In Germany just 43 per cent of residents own their own home. Professor Michael Ball, author of the RICS European Housing Review 2009, says: “Germany hasn't developed the same sentimental attitude towards home ownership as the British, partly because the relative cost of owning a house is much higher there. People tend to save for a deposit and buy in their forties.” Germany allows tenants to negotiate lower rents the longer they stay in the same property. Most landlords are individuals with small property portfolios who are given an incentive to buy-to-let via income tax breaks. What about America? In the US, where 33 per cent of the population rent, according to the American Housing Survey 2007, more than 50 per cent of landlords are large companies or institutions such as MetLife, an insurance company, and Equity Residential, a real estate investment trust. Nick Jopling, head of residential at CB Richard Ellis, says: “These are purpose-built apartment blocks where the quality of living is much better and landlords treat their tenants as an asset. Rents aren't significantly cheaper than they are here but you get more bang for your buck.” Do these systems work? The German Government would like to increase home ownership. Professor Ball says: “The kind of long-term tenancy that Germany has can have a negative socio-economic impact, encouraging a lack of mobility as people choose to stay where they are for cheaper rents. This suffocates the birth rate, because people stay in their high-rise flats throughout their thirties and don't have room for big families.” So what happens next? Sir Bob Kerslake, chief executive of the Homes and Communities Agency, is keen to help institutions to invest in build-to-let stock. Some firms have begun already: the UK's largest residential landlord, Grainger, will let one third of its new flats, above, on Hornsey Road, North London, adding to its portfolio of 14,000 tenanted properties; rents will start at £220 a week. Andrew Pratt, managing director of residential at Grainger, says: “Build-to-let is a growing idea and may become an attractive option for developers.” Richard Donnell says: “I do not think we are going to see the rental share of the housing market jump up to 40 per cent, particularly as home ownership is still the best way to make tax-free capital gains on an asset. And, usually, as we get older and need larger homes, renting is more expensive in the long run. But it is quite likely that it will climb from 10 per cent to something like 17 per cent.”
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