Housing Demand:

Demand outweighing Supply:

The shortage in homes which we now face has been brought about by a number of factors in our view:

Net migration into the country is significant in affecting demand along with the increased prevalence of people living alone. This creates a smaller average household size.

Indeed the government predicts that there will be an overall increase of 14% in the number of households in this country by 2021.

Coupled with this the rate of house building in the UK is not keeping pace with the demand. In 2005 193,000 new houses were built. Although this is the highest for 15 years, it is still only 3 quarters of the number that the government’s own independent report estimated would be required each and every year to bring house price inflation down to 1%.

Developers would love to respond to this demand by building more property. However they are prevented by government planning restrictions and schemes such as key worker housing.

The current shortfall is around 120,000 new homes per annum according to the 2003 Barker Report; by 2021 the Halifax predicts that the shortfall will have reached 400,000 per annum.

In simple terms the demand for property is far outweighing supply, keeping prices at a premium. These statistics form the basis for our assertions for future price growth in the market and once again positive evidence for investing in property.

Growth in Buy To Let in the UK:

The UK rental market has grown significantly since the introduction of Assured Short hold Tenancies and the introduction of Buy to Let mortgages in 1996.

Between 1995 and 2003 the number of people needing temporary accommodation doubled from 46,000 to over 93,000 according to the Barker report.

This trend has continued with demand for the right type of rental properties in the correct areas remaining strong. Another effect of continuing price growth has been the increased difficulties first time buyers have in buying property. This has fuelled rental demand as more of the population need to rent for longer before being able to purchase.

The trend in the UK is also for shorter working contracts, meaning that people move more often for work and as they aren’t permanently in one place they will often rent.

Increased levels of personal spending have also created a situation where people save less and so don’t have deposit monies available to fund a mortgage.

The UK is one of the few positively geared Buy To Let markets. This is to say that in certain areas with specific property types mortgage and running costs can usually be met by rental income. Although this is becoming more difficult with the recent rise in interest rates, rental income for property under £125,000 in the Peterborough area generally do not cost as much to maintain per month, especially when compared to new build or all property in other locations.

Rents in the UK on average have doubled every 9 to 12 years through history.

The UK also has one of the most competitive Buy To Let mortgage markets in the world meaning that interest rates are low and lending environments efficient.

The system ensures that borrowers are approved electronically at high speed and offers are issued quickly.

All great news for focused UK investment!

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