First time buyers are struggling more than ever to get on to the property ladder. What does this mean for property investors? How can buy to let investors make the most of this increasing trend to maximize their long-term returns on their property portfolios?



iPod generation

The younger generation, often referred to as the iPod generation, is continuing to struggle to get on the property ladder. With the average age of the first time buyer now in the mid thirties, it seems that more and more people are renting for longer.

It is the inability of the younger generation to get into the property market that drives the buy to let market to a large degree. However, this growing number of young professional renters has significantly changed the demands of the rental market.

Twentysomethings leaving university, these days, have amassed large debt, often in excess of ?20,000, meaning that saving for a deposit on a house or flat is a long time away. Owning property is something that is viewed as a luxury by most of the younger generation; it is now generally presumed that they will rent for a substantial part of their early working life.

This presents two major issues for property investors. On a positive note, this means that there is an increasing number of high earning tenants looking for rental property. However, on a more cautious note, it is worth considering that as the younger generation is not as keen on purchasing property and there is a danger that the housing market will stagnate somewhat, with new buyers choosing not to enter the market.

Despite this, most individuals will purchase their first property when they are able to afford the deposit and are suitably settled, geographically. However, a cautious property investor may want to opt for a slightly higher annual yield to ensure that they are not relying entirely on capital gain.

Making the Most of this Knowledge

As a property investor, there is real strength in recognising the characteristics and importance of the iPod generation. Tenants, nowadays, are more commonly discerning professionals who are not in a position to buy their first property. As many people now rent well into their 30s, the focus for those with a buy to let portfolio should be on providing high quality and convenient property for singles or couples.

One of the key trends, within the rental market, is the demand for one-bedroomed flats. Traditionally, tenants would often be sharing with others or would be a family. With more young professionals renting for longer, the demand for one-bedroomed accommodation is now outstripping the rest of the market.

Ludlow Thompson, a letting agent in London, has said that the growth in rental for one- bedroomed flats was 3.3 percent, in November last year, in comparison with 1.5 percent for two- bedroomed flats and an overall average of 2.4 percent. Unsurprisingly, rental for four-bedroomed detached properties dropped by 0.8 percent.

Overall, rents for one-bedroomed flats in London increased by 16 percent, over the previous year. Across the UK as a whole, this figure was still a respectable 8.4 percent.

Stephen Ludlow of Ludlow Thompson says: ?When people first enter the rental market, they look at the cheaper option of sharing with friends and work colleagues. As their income grows, they can afford more privacy and a higher standard of accommodation and rising wages means they can pay for that?.

He offers some advice to potential landlords by saying: ?If you want to retain better quality tenants you should look for higher than average quality properties, make sure the fittings are of a high standard and buy in areas that are likely to attract your target tenants?.

The growing trend of renting for longer is something that a buy to let investor can really make the most of to ensure a solid rental yield. Do your research and remember, quality rather than quantity is the way forward in the current market!

Get more information on the way to make the most out of the iPod generation trend from these sources:

money.independent.co.uk/property/homes/article355741.ece

www.arla.co.uk

www.home.co.uk/guides/news/tmc.htm?9488