Table of Contents
Issues in the Market
-
- Market evolution
- Key issues
- Market definitions
- Abbreviations
Insights and Opportunities
-
- Still room for growth
- Overseas property an important sector of the market
- The global credit crunch will reduce competition in the UK buy-to-let mortgage market
- Buy-to-let market to ride out the economic storm
- There will still be opportunities in 2008
- Longer-term prospects look rosy
- Joint press and Internet market will maximise the marketing message
Market in Brief
-
- Strong market momentum
- 2008 a more difficult year but longer-term prospects are generally good
- The social imperative
- Market environment
- Competition in a state of flux
- Product innovation continues but there is some retrenchment
- Heavy reliance on intermediaries
- Buy-to-let advertising activity more than doubles in 2007
- Mintel’s consumer research findings: property ownership and aspirations
- Who are UK landlords and what do they need?
- Attitudes towards property investment are largely positive
- Property investment and property ownership clusters
- Large untapped market potential
Fast Forward Trends
-
- Brands Under Siege
- What's it about?
- What we’ve seen
- Specifics
- What next?
- Home as Pension
- What’s it about?
- What we’ve seen
- Specifics
- What next?
Broader Market Environment
-
- Key points
- Strong demand for rented accommodation
-
- Figure 1: Number of households in Great Britain (000) and average household size (persons per household), 1976-2011
- Implications
-
- Figure 2: Number of households in England by type (000), 2004-11
- Implications and opportunities
- Student population continues to expand
- Implications and opportunities
- Migration trends
-
- Figure 3: Net migration flow into the UK (000), 1991-2006
- Implications and opportunities
- Space in the rented sector
- Technologically – Improving the flow of information
- Economic backdrop
- The global credit crunch
-
- Figure 4: Phases of the 2007 global credit crunch crisis
- Implications and opportunities
- The UK sub-prime market – possible impact on buy-to-let
- Implications and opportunities
- But the cost of borrowing likely to decline over 2008
-
- Figure 5: End month weighted average interest rate, standard variable mortgage, banks & building societies, January 2000-December 2007
- Inflationary pressures under control
-
- Figure 6: Interest rates, CPI and GDP projections, Q4 2007-Q4 2009
- Outlook and implications for buy-to-let
Internal Market Environment
-
- Key points
- The renaissance of the privately rented sector
-
- Figure 7: Total number of UK private rented dwellings (million) and the share of all dwellings accounted for by private rentals (%), 1981-2007+
- A nation of homeowners
-
- Figure 8: Tenure structure of dwellings (millions of dwellings and % of total), 1981-2007+
- Buy-to-let accounts for a rising proportion of private rentals
-
- Figure 9: Share of private rental dwelling being purchased with BTL mortgages, 1998-2007
- House price inflation – driver and drawback
-
- Figure 10: UK average house price index (Feb 2002 = 100), Feb 2002-Dec 2007
-
- Figure 11: The average value of rented houses and flats – all regions (£000), 2007
- Regional house price variation
-
- Figure 12: Index of house prices by region, October 2007 (Feb 2002 = 100)
-
- Figure 13: The average value of rented houses and flats (£000), 2007
- Average rents have grown
-
- Figure 14: Private sector rents (£ per month), 1994/95-2006/07
- Rental demand strong but returns falling
-
- Figure 15: Rental returns (% yield) to landlords, Q3 2003-Q4 2007
- Location, Location, Location
-
- Figure 16: Buy-to-let annual return on investment, by region, 2006-07
- Implications and opportunities
- Profile of residential investment landlords: investment motive
-
- Figure 17: Landlords viewing BTL as a form of disciplined savings, 2007
- Figure 18: How long BTL landlords have been investing in property (%*), July 2007
- Implications and opportunities
- From buying to marking time
-
- Figure 19: How landlord are acting over their net investment in residential property (% of landlords), Q4 2004-Q4 2007
- Most investors have fairly small portfolios…
-
- Figure 20: Number of rented residential properties in portfolio, November 2007
- A safer haven in a credit storm…
-
- Figure 21: Buy-to-let mortgage arrears, maximum LTV and minimum rental cover, 1999-2006
- Increasing regulation is a cause for concern for landlords
- Tenancy Deposit Scheme
-
- Figure 22: Tenancy deposit schemes joined by landlords, November 2007
Competitive Context
-
- Key points
- Buy to let property: only one source of “passive” income
-
- Figure 23: Sources of passive income, June 2007
- Buy to let competes in the property investment market
- The emotional pull of bricks and mortar
-
- Figure 24: Net worth of the household sector, 2000, 2002, 2004, 2006 and 2007
- Implications
- The search for control
- People are fundamentally risk averse
- The Footsie remains volatile
-
- Figure 25: Annual change in the FTSE All Share Index compared with annual house price inflation and the return on bank and building society deposits, January 2004-November 2007
Strengths and Weaknesses
-
-
- Figure 26: Buy-to-let mortgage market – SWOT analysis, 2008
-
Who’s Innovating?
-
- A market based on innovation
- Key innovations in the past few years
- Increased product differentiation by type of landlord
- Back office innovations
- Automated valuation models: a new role
- Innovation also brings problems
Trade Perspective
-
- About the participating organisations
- Market still has opportunities for innovation…
- But the pace of change may slow
- Will competition from the high street intensify?
- The global credit crunch to change the competitive landscape in terms of gross advances
- But financial market turmoil won’t affect landlords
- A weaker housing market will not halt the growth in the buy-to-let market…
- And landlords will ride out any short-term difficulties
- Overall perceptions of the market remain positive
Market Size and Forecast
-
- Key points
- A fundamentally strong and dynamic market
-
- Figure 27: Number and value of buy-to-let mortgages outstanding, 1999-2007 (year-end)
- New business is booming
-
- Figure 28: Number and value of buy-to-let sales, 1999-2007
- Boom or bust – or somewhere in between?
- Wait and see strategy
- Those at the coalface are still upbeat…
- …but major supply side concerns
- Remortgaging drives the market in 2008
-
- Figure 29: Buy-to-let gross advances, 2005-08
- Opportunities for expansion
- Forecast
- Market should weather the storm
-
- Figure 30: Number and value of buy-to-let mortgages outstanding, 2003-2012 (year-end)
- But growth will be slower
-
- Figure 31: Number and value of buy-to-let sales, 2003-2012
- Factors incorporated
Market Share
-
- Key points
- A big three lead the market
-
- Figure 32: Ten largest buy-to-let lenders by balances outstanding and gross advances, 2007
- A stable market for outstanding business but 2007 brings in new uncertainty
- A jostle for market position in terms of new business
- Implications of the credit squeeze
- Top five account for over half of new buy-to-let business in 2006/07
-
- Figure 33: Market share of top five buy-to-let lender groups, by gross advances, year ending September 2007
-
- Figure 34: Market share of top five buy-to-let lenders, by gross advances, year ending September 2007
Companies and Products
-
- Key points
- Little product differentiation
- Profiles of the largest buy-to-let lenders
- Mortgage Express
-
- Figure 35: Bradford & Bingley’s buy-to-let mortgage business, September 2007 and December 2006
- Birmingham Midshires
- Paragon
-
- Figure 36: Paragon New Mortgage Business, year ending 30th September 2007
- Nationwide Building Society (UCB Home Loans, Mortgage Works)
-
- Figure 37: Nationwide buy-to-let mortgages outstanding, 2006-07
- Northern Rock
-
- Figure 38: Northern Rock buy-to-let mortgages outstanding and gross advances, 2006-07
- GMAC-RFC
- Other major providers
- Cheltenham & Gloucester
- Capital Home Loans
- Bristol & West
Brand Communication and Promotion
-
- Key points
- Overall mortgage ad spend declines in 2006…
-
- Figure 39: Mortgage adspend, by category, 2003-07
- Implications and opportunities
-
- Figure 40: The change in mortgage adspend, by category, 2006-07
- Investment in promoting buy-to-let on the up
-
- Figure 41: Buy-to-let mortgage adspend (£000) and share of the mortgage adspend taken by buy-to-let, 2003-07
- Buy-to-let providers focus their ad spend on the press
-
- Figure 42: Buy-to-let mortgage adspend, by channel, 2003-07
- Implications and opportunities
- C&G and Bradford & Bingley the heaviest investors
-
- Figure 43: Buy-to-let mortgage adspend, by advertiser, 2003-07
Channels to Market
-
- Key points
- The distribution mix: intermediaries dominate
-
- Figure 44: Main channels to market – illustration, 2008
- Buy-to-let a key business area for intermediaries
- Web support
- Intermediaries have a prominent presence in the buy-to-let mortgage market
-
- Figure 45: Distribution channels used by the top ten buy-to-let lenders, by gross advances, in 2008
The Consumer – Property Ownership and Aspirations
-
- Key points
- Survey background
- Only 6% of homeowners have a second property
-
- Figure 46: Property ownership and intentions to buy, December 2007
- A million UK landlords
-
- Figure 47: Size of the second-property-owner population, December 2006-December 2007
- Overseas property more popular than UK property
-
- Figure 48: Size of the prospective target market for second properties, December 2006-December 2007
- Implications and opportunities
- Mortgage holders are more likely to invest in buy-to-let than are outright owners
-
- Figure 49: Second property ownership and intentions to buy, by tenure, December 2007
- Implications and opportunities
- Affluence: the key determinant of second homeownership
-
- Figure 50: Second property ownership and intentions to buy, by socio-economic group, ACORN category and household income, December 2007
- Implications and opportunities
- Is it a mid-life thing?
-
- Figure 51: Second property ownership and intentions to buy, by gender, age and TV region, December 2007
- Implications and opportunities
- Regional hotspots
- Family and third agers lead the way
-
- Figure 52: Penetration of second property owners and prospective targets, by marital status, lifestage, Special Groups and working status, December 2007
- The press and Internet work in co-operation to reach second homeowners
-
- Figure 53: Demographic profile of second property owners and prospective targets – part 3, December 2006
- Implications and opportunities
The Consumer – UK Landlords
-
- Key points
- Context
- Landlords are similar to second homeowners: middle aged and wealthy
-
- Figure 54: Penetration of landlords in the UK population by age, gender, socio-economic group, ACORN group and household income, December 2007
- Pre-family and no-family adults are important landlords
-
- Figure 55: Penetration of landlords in the UK population, by marital status, lifestage and Special Groups, December 2007
- Implications and opportunities
- Only a small proportion of landlords are buy-to-let landlords
-
- Figure 56: Landlord ownership of buy-to-let mortgages, December 2007
- Implications and opportunities
- Landlords take out a narrower range of mortgages compared with other property owners
-
- Figure 57: Mortgage ownership, by type of property owner, December 2007
- High proportion of landlords are self-financed
- Landlords like flexibility
- Desire for flexibility
- Flexibility and certainty drive the buy decision
-
- Figure 58: The mortgage options preferred by landlords, December 2007
- Implications and opportunities
The Consumer – Attitudes Towards Property Investment
-
- Key points
- Belief in the efficacy of property investment: the bedrock of the market
-
- Figure 59: Attitudes to property investment by second homeownership, December 2007
- Property investment, a replacement for the pension
- Increased concerns over house prices
- Implications and opportunities
- Landlords view property as a wealth generator and psychological support
- Luck and location play a part
- Target group analysis
- What is cluster analysis?
- Four investment groups
-
- Figure 60: The attitudes of adults to proerty investment by investor grouping, December 2007
- Landlords and second homeowners have clear views on property investment
-
- Figure 61: The attitudes of adults to property investment by second homeownership, December 2007
- Pension planning the strongest motivation
- Landlords and second homeowners are more likely to be cautious and less likely to be medium-term investors
- Landlords are less likely to plan over the medium term
- Implications and opportunities
- The wealthy tend to be cautious investors…
-
- Figure 62: Attitudes towards owning and investing in property, by type of mortgage, December 2007
- …and so are pension planners
- Implications and opportunities
- Lack of clarity a young and old phenomenon
-
- Figure 63: Attitudes towards owning and investing in property, by marital status, lifestage and Special Groups, December 2007
- A lack of assessors in the South?
-
- Figure 64: Attitudes towards owning and investing in property, by TV region, technology usage, Internet usage, newspaper readership and commercial TV viewing, December 2007
- Medium-term investors tend to be in the South
- Attitudes to property investment stem from views about property ownership in general
- Optimists and security seekers have the strongest positive attitude to property ownership
-
- Figure 65: Attitudes to property by ownership group, December 2007
- Medium-term investors and pension planner have the most positive views of property
-
- Figure 66: Attitudes to property by property investor group, December 2007
- Cautious investors see both sides of the argument
- Unclear investors show ambivalence to property ownership
-
- Figure 67: The property owner and property investor groups, December 2007
The Consumer – Targeting Opportunities
-
- Key points
- Buy-to-let: pushing at a open door
-
- Figure 68: Attitudes towards property investment, by property ownership, December 2007
- Implications and opportunities
- Only 7% of those who would consider a buy to let are existing landlords
-
- Figure 69: Agreement with statements about buy-to-let and property investment, December 2007
- The young are the most open to a buy-to-let offer
-
- Figure 70: Profile of buy-to-let targets, by gender, age, lifestage, marital status and Special Groups, December 2007
- The bias towards wealthy landlords will continue
-
- Figure 71: Profile of buy-to-let targets by indicators of wealth, December 2007
- But the poor also have aspirations
- The broadsheets and the net are a prime combination for reaching targets
-
- Figure 72: Profile of buy-to-let targets by media and commnuncations channels, December 2007
- Pensions a key driver for buy-to-let targets
-
- Figure 73: Buy-to-let targets and non-targets and their attitudes to property investment and property ownership*, December 2007
- Targets consider buy-to-let as an investment
- Be honest with targets
- Prime targets favour mortgage funding for buy-to-let properties
-
- Figure 74: Proposed/actual source of funding for buy-to-let purchase, December 2007
- Implications and opportunities
Back to top