We’re unlikely to see many changes to the market in 2011, argues Bob Young, managing director of Capital Home Loans
So, that was – just about – the year that was. 2010 – how was it for you? Certainly, when the history books are written, the last 12 months will certainly prove to be a momentous year in many areas, but I suspect that the review of the mortgage and housing markets may only warrant a couple of lines at best. Indeed, perhaps even two might be enough – how does ‘uncertain’ and ‘subdued’ grab you? Many might even propose ‘better than 2009’ although this could be a moot point.
Certainly, in our sector, buy-to-let, the year ended in a much more positive light than 12 months ago. The Coalition Government’s Comprehensive Spending Review seemed to put the onus on the private rental sector to fulfil the social housing gap, and with positive news on rental yields, landlord ambitions, lending activity and rental voids, there was even enough positivity to put the sector back on the pages of the mainstream personal finance press.
And there lies the worry. I am in danger of becoming a broken record on this topic but it is my sincere hope that these positive soundings from the buy-to-let market are not translated into a, ‘come on it, the sector’s lovely’ message being distributed to would-be landlords. To our mind, this is still a sector for the professional landlord and we should not be suggesting that amateur landlords will be able to make a quick buck. This is simply not the case and, given that professionals are struggling themselves to generate the necessary finance, then I would again suggest that any lender focusing on the amateur lending market needs to rethink its priorities.
That said, buy-to-let seems to be in a much more positive place than its’ most recent past. However, this is not to say that everything in the garden is rosy. I had a conversation recently with a journalist of some repute – who shall remain nameless – that had deep reservations about the private rental sector and buy-to-let as a concept. He was worried that, without the ability to purchase their own home, we were destined to have future generations reaching retirement with no place to live because they would not have the income in retirement to pay their rent. At least, the argument went, with home ownership the retired would (hopefully) have paid off their mortgage and be safe in the knowledge they had a roof over their head.
The question of course is whether this scenario is likely to play itself out. Does this Government really have home-ownership aspiration at its heart? If so, then owning one’s own home will not be out of reach for large swathes of the population and therefore we should not see generation after generation ‘forced’ to live in private rental accommodation for the duration of their working lives. Certainly, we are not expecting house prices to be sky-rocketing out of the reach of even more potential buyers any time soon indeed the likelihood is that prices will remain at their current levels for the next couple of years. In that sense, affordability will be much better albeit allowing for the fact that potential purchasers are able to save enough for their deposit and access the still limited funding that is available.
So, I do not believe – and you would expect me to say this – that the private rental sector is something to be feared. It will remain a viable option for significant numbers of people certainly the Government (with the path it has followed) will be relying on the sector to ‘make up the numbers’. How efficient and effective it will be in doing this remains to be seen, however, we will certainly need to see greater access to funding to allow landlords to purchase property and make it available to meet the growing tenant demand.
While we welcomed a number of new buy-to-let lenders to the sector in 2010, and one notable returnee, we are still very much a two-lender state when it comes to buy-to-let financing and the added money brought in by the ‘newbies’ is not going to set the world alight, regardless of its positive intent. Therefore, we wait to see how the square will be circled here and one might suggest that we will not have any major movement in the next 12 months.
And so we end the year with what might be described as ‘cautious optimism’. Existing landlords should have seen a noticeable improvement however this may not be translated into an ability to add to portfolios and capitalise on the opportunities that do exist in the property market. We expect to see lenders increasing their exposure to buy-to-let in 2011 but only in small steps and we would not anticipate a move up the risk curve as well – and quite honestly, why should they? Responsible lending is vital and one suspects, in this regard, all buy-to-let stakeholders – indeed all mortgage market stakeholders – will not be anticipating any great changes in the year ahead.
