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Time to target professional landlords

In recent months the pages of this magazine have been filled with advice from industry commentators about the need for brokers to diversify to survive the credit crunch. So it’s good to see evidence that this is happening in two key areas, namely protection and buy-to-let.

Legal & General claims that despite the slump in the mortgage market, brokers remain optimistic about the prospects for protection. According to its latest adviser confidence index, almost 80% predict that sales will improve or at least remain constant in the next few months.

And according to a broker survey carried out by The Mortgage Works, almost half of those polled expect to see established landlords increase the size of their portfolios in the next six months.

Interestingly, the survey also highlights a divide between professional and amateur landlords – an important consideration for brokers when attempting to target the right customers at the right time.

Some 82% of brokers surveyed suspect that amateur landlords will sit tight and not invest further as house prices fall. This represents a 20% rise compared with six months ago when only 62% felt amateurs would play it safe.

But as always, there is a mixed picture when it comes to the prospects for buy-to-let. For example, figures from the Council of Mortgage Lenders show an 18% decline in the number of new loans in the sector in the past six months. This variation doesn’t surprise me because the CML figures look backwards and the TMW survey looks forwards.

Anyway, the buy-to-let market is bound to look different now when compared with the first half of 2008, not least because house prices are falling and are likely to keep doing so until 2009. I don’t expect a modest upturn until 2010 and a return to 2007 levels until perhaps 2012.

A recent survey from Paragon Mortgages is also bullish about prospects for the rental sector because rising rents and fall-ing property prices have led to growing optimism among landlords.

I reckon we can expect buy-to-let to blossom in the next couple of years. After all, the clever money is sure to sit tight and wait for house prices to bottom out, and this may not happen for a long time.

But the key for brokers is to start laying the foundations now by targeting the right kind of landlords as it is reasonable to assume that a number of amateurs will already have had their fingers burnt and will run a mile at the thought of investing again.

The potential lies in tapping into the professional sector. I know this is easier said than done because many investors already have broker relationships in place or handle the pro-cess themselves. Nevertheless, the opportunity shouldn’t be ignored.

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