In the Short term the buy to let sub market is performing well.
- Uncertainty over the direction of house prices and interest rates is discouraging more people from buying at the moment. This is increasing demand for alternative renting.
- Shortage of Supply. Recent studies show there is a chronic undersupply of houses in the UK. This is keeping prices for renting and buying high.
- Immigration and oversees buyers is increasing demand for houses, even though UK first time buyers are being priced out of the market
However in the Long Term there are concerns about the prospects for the Buy to Let Market
- House Price to earnings ratio has increased so much that it is difficult to justify continued rising house prices. Many experts argue house prices in fact are fundamentally overvalued. See house prices will fall.
- Inflation in the UK is at the higher end of the governments target. If global inflation starts to increase due to rising commodity prices this could mean higher interest rates in the medium term. This would eat into the profitability of buy to let and therefore could lead to falling demand.