Cover Story
GettinG in on
the action Buy-to-let is where the party is but understanding this market is key to success. Yuan Phoon investigates
The road to 2011 was paved with good indicators. The birdsong of a busy phone line teased us however, the sweet sonorous sounds of free flowing business have yet to fully materialise as the market has remained in a muted state. One area that has appeared to buck the trend though has been the buy-to-let market as several members of the industry had prophesied. Those predictions appeared to have come to fruition as the council of mortgage lenders reported a £600m increase in buy-to-let gross advances in the second quarter of this year. This has led many in the industry to use the term “mini-boom” when describing the buy-to- let sector.
Do numbers reinforce the jubilance? Compared to its peak in 2007, when buy-to-let was
worth £44.6bn and enjoying a 12% market share, the sector still feels relatively subdued. At its lowest, buy-to- let was valued at a meagre £1.9bn in Q2 2009 with a 6% of overall mortgage market share. But since then, we’ve come a long way to nearly doubling the value of buy-to-let mortgages to £3.5bn with a 9% share. Pointing out that buy-to-let hasn’t recovered to pre- crunch levels will do little except reinforce to all that we’ve been through a financial crisis. What can be done however is to look further afield. Ian Andrew, head of intermediary sales at Nationwide, is upbeat about the continuing trend. “The economic indicators for buy-to-let are very strong,” he said. “First-time buyers are struggling to
4
get a foothold in the market and I think that’s unlikely to ease in the short term. “The austerity measures are kicking in so more people have less disposable income making it more difficult for them to gather deposits for houses and of course at a time of uncertainty in a lot of the job market and the uncertainty in house prices, many people are choosing to rent as opposed to buy and that’s driving rental incomes up and void periods down.”
Signs All the pieces of a positive market appear to be falling in
to place for a continuing rise in buy-to-let. After a review of the medium and long term prospects of the mortgage market, Legal & General mortgage club set its sights on becoming the top distributor of buy-to-let mortgages in the UK by 2014. Ben Thompson, mortgages director at Legal & General, says: “We have seen for some time that the buy-to-let sector is set to grow. There are a number of forces colliding that impact this growth, most obviously the lack of mortgage funding in particular for first-time buyers and the lack of funding for social housing, meaning the private rental sector steams ahead, or steps in if you like. “Additionally in a low interest rate environment, buy-to- let can in many parts of the UK look highly attractive, if not immediately from a capital appreciation perspective, then certainly from a regular yield perspective, driven largely by demand outweighing supply. This trend and increase will have quite some way to run yet as we don’t anticipate any of the above changing in a meaningful way any time soon.
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36