Last week, the British Bankers’ Association reconfirmed what most of us already know - that while demand for mortgages among owner-occupiers has slowed, among buy-to-let investors and landlords it has picked up materially.
This trend is something we’ve witnessed at Dragonfly. Over the past six months, AIPs are up by over a third on the previous six months – and this is due in no small part to the hunger of buy to let investors seeking to add to their portfolios.
It’s not hard to see why. The rental market, with many people unable or unwilling to buy, is booming. Rents and yields are skyrocketing and people want to have a bite on the cherry. But is it going to last? Are we seeing the formation of a bubble in buy to let? It’s certainly been mooted once or twice in the media.
I would say no and for a number of reasons.
First and foremost, the criteria for home-ownership remain tough. Unless you have a deposit and a watertight credit history, you’ll struggle to secure a loan full stop. Yes, borrowing is opening up slightly at higher LTVs but the door could well slam shut as soon as it has opened if the Eurozone crisis deteriorates and the banks are not sufficiently shored up.
And even if Greece and the Eurozone crisis is well managed, low consumer confidence, zero or negative wage inflation and an economy that looks set for protracted stagnation, does not make for a rebound in aspiring homeowners any time soon.
But perhaps more fundamentally, we are arguably witnessing a paradigm shift within the world of homeownership. The view on property among younger people is becoming increasingly continentalised – they don’t aspire to homeownership as people did 10, or even five, years ago.
A whole generation of people have been deeply influenced by the economic and market perils of the past four years and are wary of owning an asset that can, we have seen, shift so dramatically in value. This could be the biggest boost of all for buy-to-let.