It seems there is no slowing of the growth in the residential private rental market.
Recent research from one buy-to-let lender revealed that nearly half of the landlords surveyed are seeing growing tenant demand with just 3% described tenant demand as declining.
While there is still a strong desire amongst UK consumer to own their own property, in reality the growing population, increased inward migration, a more mobile workforce and the tougher rules on mortgage affordability is likely to keep up the pressure on rental demand. One leading estate agent has calculated that the private rental market would account for 24% of households by 2019 and forecast that there would be a 31% growth in private renting in the 35 to 49 year old age group.
Buy-to-let lending has seen healthy increase over the past year and some are predicting that the value of property owned by landlords will break the £1 trillion barrier next year. With interest rates set to remain at rock bottom levels for a while yet and pension reforms due to come into effect next April making it easier for people to dip into their pension pots, it won’t be surprising to see more UK consumers considering investing in property.
While many may well be financially sophisticated and have researched the best areas to get a solid return on their investment and their target tenant, they may have paid scant attention to some of the more practical nuts and bolts of owning a rental property.
They may understand the need for specific insurance for landlords, but they may not have thought about the need for accidental damage or malicious damage cover to be included. How many will have considered the potential for their property to become uninhabitable for a period due to flood damage for example resulting in loss of rent for a period? I’d be willing to bet not that many. And while they may know who they want to market their property to, will they have considered that some landlord policies may not cover their target tenant – students for example.
Another example would be rent guarantee insurance which provides your landlord with valuable legal expenses protection should they need to remove a troublesome tenant and, arguably more importantly, continue to pay the rent whilst this is happening.
Much of these types of covers are available as options on landlord property insurance policies so reviewing these with your landlord client is essential – especially as they could be tempted to source their insurance through the price comparison websites which we all know is a course of action with many pitfalls.
These virgin landlords represent a strong target market for intermediaries. If their investment is going to take up a significant chunk of their life savings, they need advice and guidance to ensure that investment is properly protected. While the residential mortgage market is far more buoyant than it was a year ago, ignoring the potential revenue that you could develop from landlords – especially the new entrants – could be a risky strategy.