BTL Continues To Top the Charts in 2011 – Financial Services Industry and Government Agree

The case for buy-to-let (BTL) grows stronger all the time. Interest from financial firms continues to strengthen the sector and recent Government statistics on the private rented sector (PRS) serve to add a further boost to landlord confidence.

Keen UK BTL investors can download the decision pack for the last few available units in our south east new build deal and call us on +44(0)1273 447 300 to check availability right away. Read on to find out what the financial experts and Government are saying about BTL.

Buy-to-let “tops the charts” in 2011

Earlier this year Dev Malle of Personal Touch Financial Services wrote [about lending across various sectors in 2011]: “What are the opportunities? There are two obvious ones that top the charts – buy-to-let and remortgaging. At Personal Touch, at the top of the market, about 18% of our business was buy-to-let.”

Malle believes Nationwide’s TMW and BM Solutions jointly saved the BTL market from demise, commenting: “The simple answer from a lending perspective is yes. If they had not taken the volumes they did, the smaller players would have withdrawn from the market or made LTVs and criteria so tight, so as not to be flooded, that it would have little impact.”

He continues: “[With further lenders on the market] … all this, driven by the reality that lenders see solid margins on buy-to-let and landlords see an increase in rental yields, makes it a sustainable business opportunity and one you should be ready for.”

Malle predicts the BTL sector of Personal Touch’s business to increase to 21% by 2015. The firm also predicts BTL mortgages arranged via brokers to surge by 40% to a massive £30 billion.

A “worthy investment in a lucrative business”

Specialist lender, Auction Finance Ltd, is also moving further into the property sector. Speaking on the company’s participation in the forthcoming October 2011 Property Investor Show in London, director Chris Baguley said: “The rental sector is extremely active at present and the high demand for rental properties, which is expected for the foreseeable future, makes purchasing property at auctions a worthy investment. For as long as demand continues to outstrip supply in many areas of the country, rents will continue to rise and property developers and buy-to-let landlords will find themselves in a lucrative business.”

The latest PRS statistics from the Communities and Local Government Department (CLG) reveal 17.4% of homes are BTLs, up from 16.4% in 2009. Around 3 million homes are rental properties, an increase of 229,000 since 2009). At the same time, private ownership has fallen from 14.9 million to 14.8 million homes in that same period.

CLG “keen to encourage a wider range of investors”

CLG’s release states: “Private rented housing is a vital and growing part of the housing market. The PRS offers a flexible form of tenure and meets a wide range of housing needs. [It] is already governed by a well-established legal framework and we will not introduce any further regulations. This will ensure the sector is free to grow in response to market conditions.”

The CLG report continues: “In the past, over-regulation drove landlords out of the rental market. We don’t want to introduce any measures which would form a barrier to potential landlords considering renting out their properties. We are keen to encourage responsible letting. We are also keen to encourage a wider range of investors and an improvement in standards.”

Consider also that the UK population is expected to grow to 71.6 million by 2033. The country needs 290,500 new homes a year for that extra population – that’s a city roughly the size of Coventry built every year for more than 20 years! The current build rate is around 110,000 per year.

A “change in perception” towards renting widens BTL market

Nigel Terrington, of specialist BTL lender Paragon Mortgages, believes an increasing number of people are choosing to rent for personal and financial reasons. He explains: “More people are now relying on the private rented sector than ever before and we are certainly seeing a change in perception towards renting. The increase in rented homes is fuelled by a combination of landlords buying property with cash and buy-to-let mortgages, people letting out homes they have inherited and homeowners deciding to let their property.”

He adds: “We are seeing a very different mix of tenants in the sector now. No longer is it dominated by students and young professionals, it is a much wider group including more families and mature tenants.”

It is no wonder, then, that financial firms are gearing up for an expansion in BTL lending across the board.