Buy-to-let in the UK doesn't look such a bad bet after all

Buy-to-let has become something of a dirty hyphenated word in the UK. A glut of poor quality apartments built in prominent city centres now scar the landscape and many over-optimistic amateur landlords have lost money.

But canny landlords who bought in secondary locations, perhaps tapping into student markets or aiming at young couples saving for a home, have done rather well. And new research suggests they may continue to do so.

Savills, the estate agent, says that the long-term trend in the UK is to reduce the country's fetish for home ownership, while renting increases in popularity.

It is a gradual move – 71 per cent of all households were owner-occupied in 2003 and that has dipped only slightly to 68 per cent in 2008 – but it is a pattern that will almost certainly accelerate in a recession. What is more, only 37 per cent of all households are buying with a mortgage, which means that 46 per cent of owner occupied households own their homes outright. This indicates, Savills says, that owner-occupation is dominated by those with substantial equity in their property rather than borrowing from scratch. Much of this change has been down to the emergence of a much larger, and better quality, private rented sector in the UK.

This sub-market has been expanding at an unprecedented rate since 1988, growing by an annual three per year until the credit crunch hit. By 2008, 14 per cent of all English homes were privately rented compared with seven per cent in 1989. If that continues, there will be a long-term shortage of property to rent. Suddenly, buy-to-let doesn't look such a bad bet after all.