The Motley Fool

England’s buy-to-let sector is worth £66.7bn. But is it the best way to make a million?

If you’re thinking of taking the plunge with buy-to-let, or are considering boosting the size of your existing property portfolio, then data released over the weekend would have made for encouraging reading.

VeriSmart revealed the jaw-dropping size of the property rental market in England by calculating the average annual rent paid across the private and social rental sectors and then multiplying this by the total number of rental households.

The data showed that the English rental market is worth a staggering £66.7bn, comprising 3,939,000 social renters paying an annual rent of £5,304, and 4,524,000 private tenants forking out £10,128 each year.

To put this in perspective, if the property rentals market in England was to be slipped into the global GDP rankings list it would rank higher than 159 world nations and sit between Sri Lanka and Ethiopia.

Country

GDP (£ billion)

Ecuador

80.3

Puerto Rico

80.2

Slovakia

73.9

Cuba

72.2

Sri Lanka

67.3

England’s buy-to-let market 

66.7

Ethiopia

62.3

Kenya

61

Dominican Republic

58.6

Guatemala

58.2

Oman

54.5

London calling

The report also revealed the staggering value of the London rentals market that VeriSmart — which specialises in property inspection and compliance assessment — puts at £21.8bn, the social rental sector contributing £4.6bn per year and £17.2bn coming from the private sector.

This makes the capital property market larger than the economies of 124 global nations, sandwiched between Latvia and North Korea. 

The numbers are there for everyone to see, but despite its size, is buy-to-let really a wise sector to invest in today? I would argue not.

In presenting the data, VeriSmart founder Jonathan Senior described the “wavering degree of confidence in the UK rental market of late from buy-to-let landlords and investors,” caused by “the relentless campaigns by the government to reshuffle the deck at their expense.” He’s not wrong. Indeed, all indications show that efforts to clamp down on buy-to-let is a vote winner, and thus you should expect the twin creep of rising costs and increasing regulation to drag on for much longer.

Buy-to-let vs shares

The majority view over here at The Motley Fool is that, in this environment, investment in stocks and shares is a much better way to generate some staggering returns.

That’s not to say that snapping up equities is a risk-free endeavour without its share of problems, though. Just ask owners of stock in energy supplier Centrica, leisure giant The Restaurant Group or courier Royal Mail, three very-different companies all beset by a variety of operational problems over the past three years which have subsequently caused them to halve in value over the period.

Having said that, though, stock investing has been proved time and again as an extremely effective way of making your money work for you. Just ask the number of ISA millionaires that have been created in recent years. Sure, you’re likely to experience some hiccups along the way, but in an environment of low interest rates and rising obstacles for buy-to-let investors it’s the best way to utilise your excess capital, in my opinion. And there’s plenty of help out there to help you steer clear of traps and make a fortune.

You Really Could Make A Million

Of course, picking the right shares and the strategy to be successful in the stock market isn't easy. But you can get ahead of the herd by reading the Motley Fool's FREE guide, "10 Steps To Making A Million In The Market".

The Motley Fool's experts show how a seven-figure-sum stock portfolio is within the reach of many ordinary investors in this straightforward step-by-step guide. Simply click here for your free copy.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.