The onset of the credit crisis saw a dramatic decline in buy-to-let mortgage volumes during 2008/ 2009 as many lenders exited the market.
The market fell from a peak of £45.7bn in 2007 to £8.5bn in 2008. Since late 2009, recovery in this sector has been relatively strong post credit crunch and is continuing to gain momentum with the outlook for future growth looking positive.
Lenders are becoming more active and we are seeing some the lenders who had previously exited the sector return and new competitors entering the market, which is good news for all. Coupled with a strong recovery and a high level of demand, this has fuelled predications that the BTL market could reach over £17 billion this year.
As many people will know BM Solutions has been around through thick and thin and we are continuing to invest in our business to ensure we can support these increased volumes. This includes further improving our service, simplifying our processes and recruiting additional staff to support the demand for our products and services.
So what is the role of the private rental sector?
Rising UK population levels and limited housing stock is continuing to lead to high demand for rental properties highlighting the important role the private rental sector plays in the housing market. At the peak of the housing boom, 180,000 properties were built.
The government target is to build 240,000 homes per annum. Most recent figures from the DCLG reveal that there were 103,000 private sector homes built in 2010, down 13 percent compared to 2009.
In the short to medium term the supply of affordable housing is likely to be severely restricted due to the lack of new private property developments and government supplied homes. Therefore the private rental sector is plugging the gap on the shortage of housing stock, fulfilling not only a vital role in meeting housing needs, but also the demand for good quality housing.
The debate about the quality of rental housing is rumbling on and is an issue that does need to be addressed.
The industry has already worked hard to improve the overall quality of buy to let business but this is very much work in progress. We need to continue to address the practice of unscrupulous investors purchasing through distressed property sales and taking part in the sale and rent back schemes.
We have implemented a series of controls to monitor such applications through our process with a view to only accepting the right quality of business.
Are longer term rental contracts a viable option?
There has been much deliberation on whether longer term rental agreements are a viable option that landlords and tenants want.
Our recent landlord panel research conducted by BDRC showed that over 75 percent of landlords are reluctant to consider longer term tenancies. Landlords are not opposed to longer term rental agreements and would consider longer term agreements if the tenant has a positive or proven track record.
This obviously would work to their benefit as well as for tenants who want longer term stability. Clearly there is a mutual agreement between tenant and landlord with the onus on both to be good at what they do and there is nothing wrong with a longer term contract assuming it works for both.
Figures show that long-term renting is becoming much more popular and is ever increasingly becoming a choice rather than just out of necessity.
While some renters are choosing to buy later in life to allow them to have a transient lifestyle for career purposes, there are also those people that may be struggling to raise a deposit together. However, whether this is leading to a growing number of tenants looking for long term rental contracts is debatable.
Landlord profiling and perceptions
The BM Solutions/BDRC Landlord panel survey reveals that overall landlords are upbeat about the outlook for UK residential property investments and the stability of rental yields achieved. Mirroring CML data that shows rental arrears are declining quarter on quarter, our own portfolio also shows a similar picture which provides reassurances about the viability of the market
The expansion of the buy-to-let market is also leading to a wider profiling of landlords.
There are landlords that typically own one or two properties; semi professional landlords who typically own 4 – 9 properties, right through to professional large scale investors who let out in excess of 10+ properties. We are seeing a growing number of new and semi professional landlords entering the market.
The main reason for investing in buy-to-let is for capital growth although this may be less attractive in the shorter term or to provide for an income in retirement.
Many will be employed full time and are not necessarily looking to use their buy-to-let portfolio as their main source of income, but rather supplement it.
Our appetite for this year is to play a greater part in the market and continue to build our support for the broker network through product launches and efficient service along with the support of our ever present BDMs. Service standards remain as important as ever.
The latest Net Promoter Score score shows that BM Solutions was rated at 87.6 alongside household names such as such as Apple and John Lewis.