Residential property investment is growing in popularity, as more and more Britons are rejecting pensions in favour of owning a rental property, or a portfolio of homes to let.

According to market analyst Mintel, the drift away from pension schemes is based largely on the perception - held by 46% of British adults - that property now represents a more secure investment than do the shares that most pension funds invest in. Given the shaky 18 months on the stock market and the continued growth in UK property values, this view is easy to understand, the only surprise being that more people don't think in that way.

About 42% of those questioned by Mintel said they would consider a buy-to-let property as an investment, with a further quarter saying that they would give it some serious consideration, two-thirds of whom thought it was a good way of providing retirement income.

But it's not just the survey that says people are warming to the idea, as the mortgage lending statistics are themselves testimony to the huge upsurge in popularity. Mintel says that the value of the buy-to-let mortgage market soared by 126% between 1999 and 2001, with sales of buy-to-let mortgages reaching £5.2 billion in 2001 - a growth rate that is more than 3 times as fast as the total mortgage market.

Mintel found that the greatest worry faced by people thinking of investing in a buy-to-let property was having to rent it out to strangers, which concerned 38% of people, while 26% said they did not think it would be worth the effort of collecting rent and maintaining the property. Only 15% said they were worried that their investment would be hit by falling prices or interest rate increases.

But while Mintel is predicting that the buy-to-let market will slow down during the next five years, with volumes increasing by just 28%, the first Paragon Mortgages market bulletin for the Private Rented Sector forecasts continuing growth in renting for the next twenty years.

The bulletin says that the absence of any substantial corporate development leaves all the opportunities to the private buy to let landlord. It also claims that, short of a significant structural change, private landlords are well placed to drive the rental sector. This will lead to polarisation among the mortgage lenders to the sector.

For investment landlords, the total return - from combining rental income and capital growth - has compared favourably with investments in gilts and the industrial sector. Only equities have significantly outperformed the residential sector but backing the findings of the Mintel survey, Paragon says that the current era of falling equity markets may encourage existing landlords to enlarge their portfolios and new landlords to enter the market.

John Heron, Managing Director of Paragon Mortgages said: "With growth in the sector boosted by buy to let investment, the market should see an increasing polarisation among mortgage lenders. While all lenders offer buy to let mortgages, a smaller number of specialist lenders like Paragon will regard the Private Rented Sector as their core business. These lenders will take a more commercial approach and help develop the business for the larger portfolio investors."

The bulletin points out that growth in the Private Rented Sector according to the Government, will include 1.4 million new households who would rather rent than buy. A substantial part of this demand comes from the increase in one person households, as well as from those cohabiting and from sharers.

The Paragon bulletin shows that demand in the rented sector is overwhelmingly for smaller properties in less expensive urban locations. This demand for flats and terraced houses accounts for 83.5% of all rented stock. There are certain areas that are the exception. These include parts of west central London where tenants from the City are the motor mechanism for top priced properties in blue chip locations.