A Brave New World
Kevin Paterson is sales and marketing director at Assurant Intermediary
Like winter roses the buy-to-let market continues to bloom in an otherwise frosty property market. Rents are at a record high in many areas and tenant demand remains robust.
The number of new buy-to-let loans increased by 16% in the third quarter of 2011, according to the Council of Mortgage Lenders and is at its highest level since the final quarter of 2008.
The number and value of outstanding buy-to-let loans also continued to grow. At the end of September, there were 1,378,700 loans outstanding, worth £157 billion, up from 1,296,700 (worth £150 billion) 12 months earlier.
Falling house prices, competition amongst buy-to-let lenders, excellent rental returns, as well as the prospect of long-term capital growth, has all meant that the buy-to-let market is currently proving attractive for investors and is likely to remain so for the next five years at least.
In this market the winners are those who can successfully ride the counter cyclical movement of the market; while the residential market festers, brokers should take heart and focus on buy-to-let.
Landlords and tenants alike will all need specific insurance provision, whether that be Tenants’ Contents, Landlords’ B&C or Landlords’ Rent Guarantee products, the growth in buy-to-let continues to give brokers a golden opportunity to generate more revenue and further demonstrate their value.
These products can be far from standard and the regulatory requirements can vary depending on the type of cover. A brokers’ expertise is essential in ensuring that customers choose the right cover.
Some policies are specific to property type, including furnished, unfurnished, unoccupied pending residential let and some properties of non-standard construction; others are more restrictive. Equally, some policies cover a wide range of tenants including students, persons in receipt of DSS benefits and asylum seekers; others are more selective.
A new focus on buy-to-let however could need a different approach and brokers might need to look to new routes to market. A direct play to partner with lettings agents for example could bear significant fruit.
And let’s not ignore the potential of cross-selling other products to this market. If you have arranged a portfolio of B&C insurance cover for a landlord, what of his or her income protection or rent guarantee provision? Whilst buy-to-let might be looking rosy, repossessions are an ever present spectre. How many of today’s landlords could sustain their debt if tenants should default or if they themselves lost their jobs?
Whilst traditional residential opportunities for revenue generation might continue to be thin on the ground, there are growth areas like buy-to-let which continue to present new avenues for brokers to explore with a little lateral thinking – it’s a brave new world ripe for the picking.