Commenting at the Association of Residential Letting Agents (ARLA) presentation into the BTL market, Michael Ball, professor of urban and property economics at the University of Reading Business School, assessed the effects of the BTL market on the industry. He claimed that without it, many young people would have been forced to become owners at a much younger age, taking on large financial strains that would leave the market more volatile.
But the financial stability of BTL investors had been reflected in the low number of defaults. With the option to rent replacing the need to buy, there are fewer financially stretched owners as a result.
Ball said: “During housing upswings, first-time buyers made the house price wheel go round. But in the latest upswing, FTBs have been far less important because many opted to be renters instead. Investors have not simply replaced FTBs as house purchasers but are part of an alternative source of housing. Default incentive structures have improved alongside having fewer financially stretched property owners and this new financial framework might be one reason why dire forecasts of house price crashes persistently fail to materialise.”
Nicola Severn, marketing manager of Mortgage Trust, agreed: “A combination of affordability constraints and lifestyle changes has led to a decline in the number of FTBs over the last 20 years and this, combined with the fact that FTBs are often very reactive to economic circumstances, has meant they can no longer be considered the driving force behind the housing market. BTL borrowers are increasing and are less reactive and more level-headed in their approach to purchase.”
