The buy-to-let market, long associated with an “ageing cohort of landlords”, is undergoing a significant generational shift. Paragon’s recent report on the next generation of landlords highlights a growing trend of younger investors entering the market, signalling a new era for property investment in the UK.
Shifting Demographics in Buy-to-Let Investments
Older landlords have historically dominated buy-to-let investments. However, Paragon’s analysis of UK lending data reveals a marked increase in activity among younger landlords. The average age of a new buy-to-let landlord has dropped from 46.4 years in 2014 to 42.9 years in 2023. This shift is further evidenced by the rising proportion of landlords in their 30s, which has climbed from 21% in 2014 to 31% last year. Notably, individuals aged 18-20 accounted for 10% of buy-to-let mortgaged house purchases in 2023, up from 6% in 2014.
Conversely, the presence of older landlords is declining. Those in their 50s now represent 20% of purchases, down from 29% a decade ago. Similarly, landlords aged 60 and above have decreased from 10% to 7% over the same period. Despite these changes, landlords in their 40s remain the dominant group, making up 32% of buy-to-let purchases last year. Overall, landlords aged 49 or younger made nearly three-quarters (75%) of buy-to-let property purchases in 2023, compared to 60% a decade earlier.
Profile of Aspiring Landlords
Paragon’s survey of 500 landlords, each owning between one and three properties, provides further insight into the profile and motivations of this emerging generation. The average age of these landlords is 37.8 years, with the highest proportion (35%) aged between 25 and 34.
Employment status among this next generation of landlords is predominantly full-time, with 77% holding full-time jobs, 11% being self-employed, 8% being part-time employees, 2% retired, and 1% looking after family at home. Income levels vary, with the highest proportion (21%) earning between £50,000 and £74,999. A significant 20% earn between £100,000 and £149,000.
Geographically, most landlords reside in London (32%), followed by the North West (12%) and the South East (9%). The location of their properties mirrors this regional distribution, with 38% in London, 15% in the South East, and 14% in the North West. The majority of these properties are individual flats (47%), with detached and semi-detached houses each making up 36%.
Motivations and Challenges
The motivations behind becoming a landlord are varied. For 43% of those surveyed, the decision was influenced by friends and family also investing in residential lets. This is closely followed by developing a long-term rental income and purchasing a second home, and so letting the first. The desire to expand portfolios is driven by factors such as the long-term demand for rental property (60%), retirement plans (54%), and anticipated long-term house price increases (47%).
Despite the success of many landlords, many do face certain challenges. Late payments from tenants are a significant issue for 38% of those surveyed. Property damage by tenants and pets affect 27% and 16% of landlords, respectively.
Paragon’s report displays a notable generational shift in the buy-to-let market. Younger investors are increasingly active, with their growing presence suggesting a changing landscape of property investment.
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