Connells Survey and Valuation has reported that the buy-to-let sector surged ahead of other areas of the housing market last month.
While most of the housing market began the year with a subdued outlook, buy-to-let bucked this trend and was the strongest performing sector with 37% growth in activity since the previous month, and on an annual basis the smallest dip of just 4%.
“The buy-to-let sector has bounced back after a disappointing performance in December when it had seen one of the biggest monthly falls,” explained John Bagshaw, corporate services director of Connells Survey & Valuation.
“It now looks to have regained that lost ground as landlords – now spoilt for choice with a record number of mortgage products to choose from – begin to invest more. Low mortgage rates have also continued, posing even more attractive deals for potential landlords or those expanding portfolios.”
The first time buyer sector of the housing market was the only other sector which saw a monthly increase in valuations activity. On a month-on-month basis, activity for first time buyers increased by 3% though on an annual basis it saw one of the biggest falls of 28% compared to January 2014.
Bagshaw said: “First time buyer activity increased on a monthly basis despite a stark contrast in performance with January 2014 when this sector had dominated the housing market.
“This was largely due to the flurry of activity as customers rushed to secure deals before the Funding for Lending Scheme (FLS) stopped mortgage funding at the end of January 2014. At the time the policy had boosted the housing market, particularly first time buyers by lowering mortgage rates.
“Since then however, a series of policies have been introduced that have restricted lending criteria which have affected first time buyers more than other sectors and consequently had a major impact on demand. However, this month on month growth is encouraging and indicates that as the sector stabilises and adjusts to the new regulatory landscape, it should continue improving in the coming months.”
In contrast, activity for those already on the property ladder has been subdued. On a monthly basis activity dipped by 4%, though compared with January last year, valuations activity fell by a steeper 23%.
In addition, remortgaging saw one of the biggest falls in activity both on a monthly and annual basis. Since December, recent activity fell by a quarter (25%), while compared with January 2014 it decreased by 28%.
“The current economic outlook indicates that low inflation and therefore the low Bank rate will continue for some time,’ said Bagshaw. “As a result it appears that this is giving rise to optimism as more borrowers anticipate that lenders will be able to lower their mortgage rates even further. They are now waiting before securing a deal.
“However, it is worth noting that current mortgage rates might not get any cheaper as the deflation in the eurozone may affect swap rates soon. As many households look for ways to cut monthly costs, taking advantage of these rates now is a good idea.”
Overall, the total activity in January saw a 4% fall since December 2014 while on an annual basis activity was down 23%.
Bagshaw said: “The expected post-holiday pick-up in activity failed to materialise with the market making a very restrained start to the year. Mediocre comparisons are due in part to the exceptional performance seen in January 2014 as a result of a healthy pipeline at the end of Q3 2013. In contrast, the transaction market slowed dramatically towards the end of last year.
“However, this slow start is not a cause for alarm as January is typically a slower month with lower volumes of activity.”