CFI: Complex Buy-to-Let
Professional buy-to-let needs more products by
John Heron, managing director, Paragon Mortgages
In majority terms the private rented sector is owned by professional landlords who have been operating in the sector for a number of years and who have extensive port- folios and experience. Tis will oſten be their sole income as their property portfolios are their business. Data from Paragon’s PRS
Other benefit claimants Older couples Rered
Families with children Professional LHA claimants Blue collar worker Students
Trends research showed that the majority of landlords had been operating in the sector for six years or longer (98%). However, 17% had been land- lords for more than 20 years. A higher proportion of pro- fessional landlords had been running portfolios for more than 20 years, 19% compared to 12% of smaller-scale land- lords. Tenants living in the PRS
Migrant workers Company lets
have also become more varied of late. Typically, tenants liv- ing in private rented housing would be young professionals or couples. Te latest BDRC Continental research report commissioned by
Young couples Young singles
Paragon
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0 One2 to 34 to 56 to 10 11 to 20 21 to 50 Over 50 44 MORTGAGE INTRODUCER OCTOBER 2012 showed that the most pro-
lific tenant types were young couples (54%), young singles (49%), families with children (47%) and white collar/ pro- fessionals (42%). Interesting- ly, families with children have remained a top three tenant type for the past year.
Future Going forward it is likely that changing tenant types will re- main a trend especially as we continue to see a high level of rental demand. Tis is also reflected in the types of prop- erty landlords are currently investing in. When asked in the PRS Trends Q3 survey, 58% of
landlords said that
they were looking to invest in terraced houses in the fourth quarter, 30% expect to buy semi-detached
houses and
21% detached homes – the highest percentage reached in more than a year. We need to see an increase
0102030405060
in lending and more product innovation. At the moment there are a variety of products available to the smaller-scale landlord and not enough specialist, flexible prod- ucts for the professional landlord – who we will rely on to be the driving force in
Migrant workers Company lets
Other benefit claimants Older couples Rered
Families with children Professional LHA claimants Blue collar worker Students
Young couples Young singles
0102030405060
“It is likely that changing tenant types will remain a trend especially as we continue to see a high level of rental demand”
growth in the PRS. I do think that there are a
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number of lessons from the past that we can draw upon today and learn from. Lend- ing criteria is much more stringent, with more credible limits of affordability in place and sensible levels of LTV. Te credit quality of buy- to-let applications is stron- ger and lenders are applying more checks and are adopting more responsible approaches. Tere are a number of chal-
0
Smaller-scale Professionals
Smaller-scale Professionals
Tere remains a good
deal of uncertainty around the regulation of buy-to-let. Whilst there has been a con- sensus around buy-to-let be- ing a business activity rather than consumer lending and the need for a fluid market to support growth in the PRS, valid concerns remain. Some lenders new to
the market are not applying adequately robust
One2 to 34 to 56 to 10 11 to 20 21 to 50 Over 50 under-
lenges facing the market for which there are no quick fixes. Te supply of new homes is a major issue affecting the UK housing market and impact- ing on the PRS. Despite the launch of recent Government schemes there is still a steep hill to climb and we need to see more house building to help stimulate the market.
writing. Tere is particular weakness around stressed affordability tests and an un- derstanding of the landlord’s wider exposure to the prop- erty market. Tere is a risk that greater constraints in the owner-occupier market will lead to a greater incidence of “gaming” fraud in the buy- to-let market. Te industry needs to be alert to these is- sues if it is to satisfy regulators that it can keep its own house in order. Te buy-to-let market is fol-
lowing a steady course at the moment and will do for some time to come. I don’t think we will ever go back to the boom years but I also do not think this is a negative factor. We need a healthy market with sustainable levels of quality business and this should be our ultimate end goal.
www.mortgageintroducer.com Tenant type
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