Understandably, as advisers you’re likely to have clients at the moment with plenty of questions for you. Perhaps the most obvious one is, can I get a mortgage?
However, let’s park that to one side for the moment, at least for buy-to-let landlord clients because before they even get to that stage, they are likely to have some rather, more fundamental, questions that are bouncing around their heads, particularly in this new post-Covid-19 environment.
For many professional and portfolio landlords, the most pertinent question at the moment is probably whether now is the time to be adding to the number of properties they have?
There’s a perception out in the market that landlords are sensing opportunities to ‘pick up some bargains’ however this is predicated on prices dropping or at least vendors being willing to consider some keen offers.
Certain data released recently does suggest that’s exactly what a large number of landlords are weighing up. Mortgages for Business’ research said 30% of investors are taking out buy-to-let remortgages in order to grow cash reserves to expand portfolios, while 46% are increasing loan sizes, apparently above the long-term average of 38%.
That may well surprise some outsiders who might look in at the PRS and review a three-monthly period where landlords have been dealing with some tenants who have not been able to pay their rent since lockdown. However, if there’s anything we’ll all have learnt working in this sector, it’s to recognise the temporary blip from the long-term opportunity.
In order to do just that, we as a lender, seek out views from numerous economists and experts – one of which gave us a detailed briefing last week. Now, there is a lot to digest at present, particularly for the UK but again the focus was on the long-term not what might happen in the next few months.
That’s important because it is likely to inform what landlords do next, and it should therefore be of interest to advisers. Our economist had an upbeat view, with for example, significant drops in UK GDP in 2020 followed by a significant rebounding, and unemployment doing something similar with public sector job expansion helping to carry a lot of the numbers which could be lost in the private sector.
And then we have what might befall those economies on the continent who may well see significant ongoing hits to their economies, especially those who are very reliant on tourism. The belief being that workers in those countries, especially those who already have UK National Insurance numbers – over 4 million – may well decide to return to the UK prompting a big increase in the number of applications to reside here.
The next question that follows that is, where do they live? Demand for property, primarily PRS property, is likely to grow which should mean rents continue to rise, and with more households comes more consumption, which is good for UK GDP. Add in a continuing strengthening of the Chinese economy, which our economist friend suggests is good for the UK, and there could be a very positive outlook for those landlords who make further plays now.
Of course, this will also tie into other fundamental mortgage-based issues such as lender appetite, rates and criteria, but as has been pointed out a number of times, there is a significant amount of equity in the properties of UK homeowners, including landlords. If they wish to use some of that to create cash reserves to fund future purchases, then the rental demand should be there (and growing) in order to ensure those properties are occupied.
You might well add in some other catalysts – might the government eye changes to stamp duty again? If so, and landlords are not left out, then again this is likely to make the case for purchasing property even stronger.
So, if your landlord clients are coming to you enthused by the current market opportunities for them, don’t be surprised. By utilising the equity they might currently have, they should be able to secure the finance to purchase and to grow their portfolios. Out of these very changeable few months, we might well have a market which could strengthen and develop for years to come.
Bob Young is CEO at Fleet Mortgages