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Steady as she goes attitude will keep B2L on even keel

A rise in confidence is good news, but it needs to turn into more enquiries and business to make a difference

Paul Whitehouse
Paul Whitehouse Head The Mortgage Alliance

It’s always nice to stride into the next year with a decent mix of confidence and impetus. The buy-to-let revival is a prime example of how a market can turn itself around after dark times.

And with the return of some, if limited, competition, this is an area that can have an effect on intermediary business levels.

Indeed, with the emergence of new entrants like Precise Mortgages and Aldermore alongside the return of Paragon, it’s fair to say a degree of renewed confidence has certainly been noted in the buy-to-let sector. continued commitment of lenders such as The Mortgage Works and BM Solutions, which looks like it will continue in 2011.

Confidence is integral to the market but it needs to transfer into higher enquiry levels and business volumes to have any impact on an intermediary firm’s balance sheet.

With this in mind TMA’s November distribution indicator focussed on whether this reported positivity had translated into an increase in enquiries for directly authorised intermediaries.

Results from the survey found that 47% had experienced an increase in buy-to-let enquiries over the last three months.

One in three noted some renewed activity but said enquiry levels had not risen significantly, while 20% denied any positivity had converted into an increase.

Comparing current market conditions to those at the end of 2009, 54% said they were definitely more confident about the future of buy-to-let this year.

Some 32% were slightly more confident, while only 14% suggested they were still not convinced that market conditions were stronger moving forward.

When another section of the survey asked whether, with the average age of home ownership rising, they thought potential buyers were turning to the rental market through choice rather than necessity, 60% did not agree.

The sector will not return to pre-credit crunch levels soon and any progression should not be rushed

So 40% of respondents said they thought more people were making this lifestyle choice rather than because of obvious funding and affordability issues.

In terms of demand, the outlook for 2011 continues to look strong. To illustrate this a recent report from Capital Economics suggests that by 2015, 17% of households will live in privately rented accommodation, up from the current 14%.

Statistics from a Royal Institution of Chartered Surveyors survey also suggest that fewer properties and higher demand for housing has led to a rise in rents in the three months to October.

A total of 39% more surveyors reported rising rather than falling rents over the three-month period, up from 27%.

The net balance reading is now at its highest level since Q2 2007 as more people turn to the rental sector.

RICS says this is driven by restricted mortgage finance and high deposits required by lenders.

These remain important factors that show no sign of going away but let’s not get too carried away.

The market that was the backbone of specialist lending only a few years ago will not even get close to pre-credit crunch levels anytime soon and any progression shouldn’t be rushed.

Opportunities are slowly but surely presenting themselves and brokers who have worked their client banks successfully will benefit.

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