Buy-to-let landlords will embark on a home buying spree in 2013 while young adults and families remain trapped in rental properties, according to a forecast by Britain's biggest property website.
Three out of four professional landlords will buy more homes in 2013, while the number of "virgin landlords" looking to buy for the first time is running at the highest level for a year, the research from Rightmove found. Meanwhile, 53% of tenants say they are trapped in renting, wanting to buy a home but unable to afford to do so.
The research is published as a committee of MPs begins a formal investigation into the problems facing Britain's "Generation Rent". The Commons communities and local government committee will examine the potential need for rent controls, regulation of landlords and letting agents, and a revision to tenancy contracts.
Urgent action is needed to tackle rogue landlords and rip-off letting agent fees, according to the Local Government Association(LGA), which represents 370 councils across England and Wales. It found that tenants are being asked to pay as much as £500 in non-refundable administration fees to letting agents on top of the rent and deposit.
Tony Newman of the LGA will give evidence to the committee on Monday. Before his appearance, he said: "With the housing market stagnant and a shortage of mortgages available to help first-time buyers, people are increasingly turning to the private rented sector to find a home.
"For many people looking to rent, the up-front costs of a deposit and agency fees can be huge. We've heard stories of some letting agents charging hundreds of pounds just to carry out basic credit and reference checks."
Bank lending to landlords fell sharply during the financial crisis but has surged in recent months, boosted by the funding for lending scheme designed to help small businesses and first time buyers. Interest rates on buy-to-let loans have tumbled – Skipton, Coventry and Birmingham Midshires all cut rates for landlords last month – and lending volumes are rising. In the last quarter of 2012, loans to landlords were up 8% to £4.2bn, with new entrants such as Interbay Commercial jostling to offer mortgages of up to £1m spread over 30 years.
Rising rents (yields average 5.7%) and low-cost mortgages (now below 4%) will spur small landlords to buy more properties in 2013, said Rightmove, even if the long-anticipated investment from institutions such as pension funds has failed to materialise.
Rightmove director Miles Shipside said: "While the cavalry charge from major institutions seeking to invest in the private rented sector has so far failed to materialise, private landlords, whether accidental, virgin or professional, are seizing the opportunities that come with having the battlefield to themselves."
But campaigners at Priced Out, a group representing tenants unable to afford to buy, said without new building, landlords are simply displacing first-time buyers.
Monday 4 February 2013 00.01 GMT