Recent figures by Mintel have revealed that the buy-to-let (BTL) market is in rude health, with predictions that it will continue to grow, year-on-year for the foreseeable future.
Research by the organisation indicated that the number of property tycoons could double by 2010, with recent figures suggesting two million people in the UK own a second home. Over 50 per cent of these were classed as BTL landlords, with Mintel revealing that a further 3 per cent of home owners expected to purchase a second property by 2010.
Paul Davies, senior financial analyst at Mintel, said: “BTL is no longer the exclusive domain of professional portfolio landlords. Increasingly property owners are seeing the benefits of investing in bricks and mortar and often regard the second homes market as a good alternative means of saving for retirement.”
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No real surprise
For the mortgage market, this should come as no real surprise. With continued rising house prices and changing working patterns, more people are being forced to consider renting, or choose to rent rather than buy a property. With changing social and economic conditions a greater number of people now prefer the flexibility of renting. In line with this, astute investors have sought to gain an advantage, securing property when they can.
While research by Paragon Mortgages has suggested that the market has been dominated by experienced investors, the Mintel study indicates that more and more ‘ordinary investors’ are waking up to the benefits of securing a second property, for rental purposes. Due to this increased influx of demand lenders have had to adapt and enhance their offerings, increasing competition and product diversity in the market, which has only served to help the BTL market.
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Tim Hague, director at BM Solutions, admitted that the findings proved the continued success of the BTL market. He said: “The Mintel predictions suggest that the recent growth that we have witnessed in the BTL industry is set to continue and also confirms that people are increasingly looking at property as part of a balanced investment portfolio.”
Non-conforming
With the non-conforming sector also continuing to grow, fuelled by borrowers in some form of financial arrears or experiencing money problems, Duncan Berry, director of mortgage sales at GE Money Home Lending, admitted his belief that the BTL market would continue to strengthen. He also indicated that, with the difference between prime and non-conforming rates becoming blurred, the non-conforming BTL market would grow.
He explained: “Mintel’s figures regarding the rise in second homes are good news for the market, and especially for non-conforming lenders who are likely to see a jump in the number of people opting for BTL properties.
“Not only is BTL continuing to outperform the market as a whole, but, with increasing demand, rising rents and a greater desire to invest in bricks and mortar, it looks set to remain a growing area well into the future and beyond.”
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The announcement by Mintel shows just how sought after properties are, as a suitable alternative to other investment opportunities, an alternative means of supplementing income, or funding into retirement. However, it does raise major concerns over the state of the housing market, and if demand continues to outstrip supply and at a greater pace, as has been predicted, then Britain could experience a sharp turnaround in the state of the housing market, leading to a change in the economic landscape.
Uncertainty ahead?
The predicted Base Rate, although set to have some impact on the market, helping to stabilise growth will have little affect on the continued boom. With the Mintel report indicating that the number of BTL mortgages is set to reach 361,000 in 2007 – 10 per cent higher than 2006 – it is clear, that even with Base Rate rises, and uncertainty over the political agenda, with Tony Blair set to leave his post of Prime Minister in the very near future, that the BTL market will continue to grow at pace.
While this will undoubtedly impact on the first-time buyers, with investors typically attracted to properties traditionally sought by aspiring FTBs, it proves that people are looking at other opportunities to secure funds into retirement. While investment opportunities and stocks and shares were once the market of choice, bricks and mortar have become a much more valuable asset, with price depreciation virtually nil. Indeed figures released at the start of the year by various organisations speculated that house prices could rise between 4-8 per cent over 2007, with no end to the increases.
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As Davies concludes: “Future growth in the BTL market should be guaranteed.” With the Mintel study suggesting that an increasing number of people are investing in property, while not letting it out, suggests that the ‘holiday home’ or ‘weekend home’ market is booming, and allows owners to sell their property in a number of years for a profit, if market conditions remain the same.
