Despite government initiatives to boost homeownership, the number of long-term tenants is increasing as people struggle to get a foot on the property ladder. According to research by Legal & General around 31% more households are in private rented accommodation than they were in 2007, and the number of homeowners has fallen 2% over the same period.
Homeownership over the medium- to long-term is expected to dwindle even further, from 68% in 2007 to 57% in 2020; meaning 1.6 million fewer households will own a home compared with the 2007 peak.
One reason to get on the landlord bandwagon is that the yield on rental property is going up. Property website Rightmove puts the average rental yield at 5.73% a year. Estate agent Countrywide is even more optimistic, placing average rental yields at 6.2%, and stating that one in 10 properties is delivering a gross rental yield of 10% or more.
For investors struggling to find decent returns without a high-risk investment strategy, investing in property in a local area is often a more palatable option. For some people, owning a tangible asset such as bricks and mortar is preferable to more intangible assets such as shares, funds and bonds.
Property also provides the opportunity for both capital growth and income, so on retirement you could sell the property, hopefully having made a profit, and you would have a bulk sum to put into a pension or live off. Equally you could continue to rent out the property and live off the income, although to do this you the mortgage needs to be paid off.
People need to see property investment as part of their pension plan, going into buy-to-let for short-term gain is not worth it as the cost of buying and selling property is high thanks to stamp duty, estate agents and legal work.
There are lots of risks associated with buying property and you have to buy a property that you think will be consistently attractive to tenants and will be full at all time, you still have to pay the mortgage in void times.
