The Private Rented Sector (PRS) in the UK has seen a 47.9% increase over last five years according to Jones Lang LaSalle’s (JLL) latest research on home ownership. Over the five years from 2006, the number of households renting privately increased by 47.9%, or 8.2% per annum.

If this rate of growth continues, it will mean 1.7m more privately rented homes will be required by 2016. This equates to an annual investment of circa £285bn – over eight times the size of the current buy-to-let market!

For the PRS is to continue to provide sufficient homes to meet demand, JLL have estimated that an additional £57bn of funding will be required per annum.

Jon Neale, director of residential research at Jones Lang LaSalle, commented:

“For most young people, high prices and unrealistic deposit requirements make homeownership unachievable and as a result many households are now finding themselves in private tenancy. Given that the mortgage market is likely to remain constrained in the near term, it is not unfeasible that the expansion of the sector could accelerate.”

The Montague Review suggests that planning authorities specify that a certain proportion of schemes remain in the private rented sector for a set period of time, with no affordable housing requirements attached to these units. This would allow the creation of a separate asset class valued in a different way to conventional owner-occupied housing.

The Government has also announced £200m of funding and £10bn of debt guarantees to help support the emergence of the sector.

Jones Lang LaSalle believes that the conditions are now in place for this sector to emerge in the UK.

Steve Bolton, Founder of PPP comments:

“We are in the early phases of the worst housing crisis that the UK has ever known. The fast growing under-supply of rental property and the ever growing demand from tenants is a double edged sword.

On the one hand, I feel extremely sorry for the millions of young adults who cannot afford to get on the housing ladder. This is the first generation in recent history where home ownership is likely to be more of a dream than reality for most people under the age of 35!

However, on the other side of the coin, there is a massive opportunity for investors with capital to invest into very high yielding buy-to-let of the type that PPP offers. In my view, any inevitable future interest rate rises will be more than covered by rent inflation in most areas.

The next two to five years is THE time to make huge profits from buy to let in my view.”