The Council of Mortgage Lenders states that there are now over 1.5 million buy-to-let mortgages in place – an increase of 120,000 in the past year. More recently specialist buy-to-let lenders revealed that landlords are increasing the size of their portfolios.
However, there are some clouds gathering.
The Treasury’s U-turn on the regulation of buy-to-let mortgages, sweeping so-called ‘accidental landlords’ into the same regime as residential property owners, has been the source of some concern to many in the UK property market.
Some fear that this move by the Treasury will give the regulator a foot in the door, leading to a more heavily regulated buy-to-let marketplace in the not too distant future. Others are questioning whether it will result in confusion for lenders, intermediaries and landlords alike – and add yet more cost to the process.
Whether this will have an impact on the number of homeowners who end up letting out a property originally purchased with a mainstream mortgage and switching to a buy-to-let arrangement come 2016 is up for debate. There is another development that could well have a longer-term impact on the UK private rental market.
Corporate renting – a long established practice in the USA whereby the landlord is a company rather than an individual – is about to hit the UK. Backed by cash from US pension funds, a company called Essential Living is planning to offer 5,000 corporate flats for rent in London alone.
It’s a totally different proposition to your typical 18-month rental, designed to encourage tenants to stay for several years.
Will it work in the UK? Well there are some advantages that could prove attractive to prospective tenants.
For example, the landlord isn’t going to put the property up for sale and so force the tenant to move. There is no letting agent involved, saving on fees. There are professional health and safety standards in place and if something goes wrong, the concierge will get it fixed. As long as the tenant pays their rent on time, there is no reason why they couldn’t stay indefinitely.
As you would expect, some are sceptical about the corporate rental offering – it’s not known how much rents will be but some tenant groups speculate that the flats will be too expensive for most ordinary earners.
As ever, the proof will be in the pudding.
To be a real threat to UK landlords and the intermediaries who help them find tenants and get the right insurances in place and so on, the corporate renting market will need to find some real scale – not just in terms of the number of companies involved but in terms of its profitability across the UK, not just in the traditionally wealthier south east.
However, if it works – tenants are happy and stay, and the cash rolls in delivering a steady income stream – then it could well prove attractive for UK pension funds.
If they get involved, then landlords and their intermediaries may well have something to worry about.