The boom in the buy-to-let industry shows no sign of bust.
The latest snapshot of property wealth taken by the Council of Mortgage Lenders, reveals that the value of property in the private rented sector was worth £990 billion in 2014. This sector of the residential property market has grown by a massive 70 percent since the credit crunch first bit back in 2007 and the CML believes that, in all likelihood, it will exceed £1,000 billion this year.
In another report, Kent Reliance is expecting the private rented sector to rise by 700,000 households to 5.5 million by 2020, representing 20% of the UK’s total housing stock. Landlords are buying homes to rent out as an investment at a rate of one every five minutes.
With average rents creeping up annually by 3.9 % and savings rates on the high street remain at rock bottom, it’s not surprising that investors continue to be drawn to the property market. Recent reforms giving people greater control over managing their pensions is expected to attract greater levels of investments by the so-called ‘silver landlords’ in the buy-to-let market. And while the new government has pledged to build 100,000 starter homes the sad truth is that it will take time, demand for housing is only going to increase and many now simply think they will never be able to own their own home.
But becoming a landlord isn’t without its risks. There may well be periods when the property is unoccupied and the ideal tenant may not live up to their reference, potentially causing damage and at worse not paying their rent resulting in the landlord having to take action to evict them. While many landlords are undoubtedly financially sophisticated, many are not and many are unaware of the range of losses that can be insured against. The bottom line is that protecting their investment with the right insurance will be essential.
While there may be plenty of business to go around in the residential mortgage side of the market, intermediaries should also be looking to grow their landlord client base. In the worst case scenario their numbers may remain stable but if you adopt an optimistic outlook, demand from the buy-to-let market should grow. Arguably it’s a sector that has greater potential for an on-going income stream as investors look to add to their property portfolio – and with every case comes a need for landlord’s property insurance, accidental damage and rent guarantee cover enabling an intermediary to earn trail commission for the life of these policies.
Building relationships with landlord clients could prove every bit as profitable as building relationships in the residential market – if not more so if current forecasts prevail!
Brian Coulton is head of sales at Source Insurance