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April 2021 | Buy-to-Let

A new chapter for buy-to-let

Bob Young is chief executive officer of Fleet Mortgages

Spend any time within the buy-to-let (BTL) market or private rental sector (PRS) and you’ll soon learn there is always an underlying agenda from certain quarters against investment in residential property.

From those who believe that landlords are somehow responsible for all the ills of the UK housing market, to shares-focused websites and publications which continually write pieces announcing the ‘death of BTL’, the agenda is there if you have any interest in looking for it.

Recently, I’ve seen a couple of pieces which suggest buy-to-let might be losing its ‘allure’, when the reality of the situation is the complete opposite.

A recent report from Capital Economics into the future of the UK housing market post-Budget makes this very clear. While the pandemic has been very difficult and has hit many people’s incomes, for others it has actually left them with more residual income at the end of the working month than ever before. Not having to spend money on travel to work, or by simply not being able to go on holiday or go out as much, means many households have either been able to save more or pay back debt.

Back in November last year, the Bank of England highlighted that this was most pertinent for ‘high-income households’, which have saved more during the pandemic, as have retirees.

It said that the number of households reporting more savings was 45% higher on average than the number for whom the pandemic had served to decrease their savings.

The next big question is around where those lockdown savings are going. Capital Economics suggests that a large amount is being invested into existing properties and the housing market in general.

Indeed, interest in property investment from those who have never done it before is growing. The latest criteria search data from Knowledge Bank reveals that not only is the BTL sector receiving a lot of interest from advisers, but ‘first-time landlords’ was the most searched for buy-to-let criteria term in February, and it has not been out of the top five for the past 10 months.

That is interesting in itself, and certainly from a buy-to-let lender point of view we are seeing a greater degree of interest from those first-time landlords who want to begin their investment property journey.

Looking at what is on offer for investors, that makes complete sense. How many would be comfortable investing in stocks and shares during this period? How many would be happy with the return, or rather the lack thereof, they currently get in the savings market? Why wouldn’t you look at bricks and mortar as a long-term investment, one that can give you a small amount of monthly income, but can also deliver in terms of capital gains over a 10, 15 or 20-year horizon?

Last year, house prices rose on average across the UK by approximately 6.5%. The suggestion is that, with the government’s Budget interventions, we are likely to see increases of 3% this year and 2.5% in 2022. Who knows, prices might once again outperform expectations as they did last year.

Certainly, the environment seems particularly positive at the moment, with demand being maintained – specifically helped by the stamp duty holiday extension – and the fact that we are, however slowly, moving out of lockdown during the Spring, a season which tends to produce a very strong period for the housing market.

No one can underestimate how much confidence this might give to both vendors and buyers alike, with the former likely to be more at ease with opening their homes to viewings, and the latter having a potential incentive to get their transactions through between now and the end of September.

I know many were fearful of a post-March cliff-edge, but to a very large extent that fear should now have dissipated. I know of no housing market stakeholder who is expecting anything less than a very busy six-month period and beyond.

Investing in property is not losing its allure, buy-to-let is about as far from being dead as it is possible to be, and we are seeing a new breed and generation of investors about to embark on their first investments.

That’s a key client demographic for advisers – if you can get them early, with an excellent service you should be able to call them a client for many years to come.

As a lender, we’re here to support these new landlords, to ensure they get the best products for their needs, and that advisers get the service they deserve. This feels like a new chapter for the buy-to-let sector – in a book that should be a page-turner for the foreseeable future.