The belief that buy to let investors are pricing first time buyers out of the housing market was dismissed by a leading expert in property economics at the annual conference of the Association of Residential Letting Agents (ARLA) held in London.
Professor Michael Ball, Professor of Urban and Property Economics, University of Reading Business School, told delegates that there is only one way to lower house prices: "It is to build more houses that people actually want to live in and in places where they want to live."
Professor Ball said that Buy to Let has substantially improved housing market stability. Without Buy to Let and a stable rental market, young households would be forced to enter owner-occupation earlier, at a more financially precarious time of their lives: "Buy to Let has increased the size of the private rented sector and extended the alternatives to both owner-occupation and social housing. It has also spread renting wider, to towns and suburbs that had little or no private renting before. It has assisted in the regeneration of inner city neighbourhoods and in some areas it has helped to revive the housing market."
As a result, Professor Ball said that it is not clear that house prices would have been lower without Buy to Let, as housing demand is still with us but supply is likely to have been less.
Turning to the effect of Buy to Let on tenants, Professor Ball said that it has sheltered many households from the full impact of house price rises, as renting is often a cheaper monthly-money-outgoings option.
Professor Ball pointed out that more younger people rent rather than own property compared to previous decades. He said that this is due to changing lifestyles, employment patterns and affluence, as well as other financial circumstances, including the rising costs of equity requirements for house purchase.
Two thirds of rented property is owned by private individuals. This is up from 50% ten years ago, when Buy to Let was initiated. This change has occurred as corporate landlords have left the market but more individuals have wanted to invest in residential property.
Buy to Let is now over ten years old, with over a million households living in Buy to Let properties. This 10-year-old initiative accounts for the housing of 5-6% of all households in the country. It contributes over £30 billion to the UK economy every year.
Investment in residential property is a mainstream personal investment activity with 750,000 Buy to Let mortgages, £84 billion in outstanding mortgages and well over £120 billion in property assets (2003 figure). This is a bigger industry than all pubs, hotels and restaurants put together and it is four times larger than the car industry.
