How has 2022 begun for you? There, of course, is always a sense of ‘not knowing’ when it comes to mortgage and housing markets, but from my perspective the outlook appears positive and opportunities for advisers, their clients and lenders abound.
In the buy-to-let space, I’ve read a couple of traditional ‘doom and gloom’ merchants suggesting well, doom and gloom, which continues to fly in the face of what we see every day, the appetite to continue to invest in property, and to take advantage of a highly-competitive lending marketplace, of which we consider Fleet as a lender fully immersed in this drive for business.
Recent prediction figures from UK Finance for the buy-to-let market over the next couple of years, focus heavily on remortgaging taking much of the heavy lifting, and while I agree it will make up the bulk of lending, I tend to think the purchase predictions are somewhat overdone.
It is still an estimate but UK Finance suggests buy-to-let purchase lending in 2021 hit £18bn. However, it predicts this figure will fall to £13bn this year, and £12bn in 2023, which as I’m sure I don’t need to point out is a year-on-year drop by close to a third this year, and exactly a third next.
Now, of course, 2021 figures will have been boosted most notably by landlords’ access to the stamp duty holiday – which might have been seen as largesse on the part of the Government but was, in our opinion, a fair approach and one that will have meant transactions were dragged forward in order to benefit from it.
However, in the grand scheme of things, and something I’ve mentioned before, if a landlord purchaser was doing so purely based on a saving of a couple of thousand pounds in stamp duty, then they are probably investing in the wrong asset.
It’s for this very reason why we’ve not seen buy-to-let purchase activity drop off any sort of cliff, neither do we expect it to do so over the next few years.
What will be abundantly clear to all landlords is the capital value of their asset at any given time – again, it won’t need me to tell you or them what has happened to house price values particularly over the course of the pandemic.
Landlords have always used and released the equity in their existing properties in order to add to their portfolios, and this is not a trend that is going to end anytime soon. Indeed, if you’ve seen the value of your asset grow by 10% – perhaps even more – in the last couple of years, let alone since you first bought it, then it makes sense to look at what can be achieved with that equity.
In that sense, remortgaging will be utilised in order to capital raise to fund deposits for new properties, and the circle continues to turn in this regard, especially in a marketplace where tenant demand remains strong, rental yield figures are solid, and where professionals want to continue to grow their propositions.
That is an important point – as we’ve seen a more professional edge to buy-to-let investing in recent years, and with a move away from those so-called ‘dinner party landlords’, the understanding of how to move a portfolio on is clear, and when you treat investment as the business it is, you are much more likely to sense the opportunity and make it happen.
Overall, therefore, there remains much in favour of buy-to-let in the coming years. That need for private rental sector housing is not going to dip, and those landlords that continue to provide the quality housing that tenants want and need are going to find rewards in doing that.
With market competition strong, and numerous product opportunities available, advisers who place themselves front and centre with the landlord community, are going to find business growth, via both purchase and remortgage. This will not be a ‘one-horse’ remortgage ‘town’ and, as a result, we will be there to support all those who want to add to portfolios, or purchase for the first time.
Bob Young is chief executive officer at Fleet Mortgages