Table of Contents
Issues in the Market
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- Key issues
- Market definitions
- Abbreviations
Future Opportunities
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- Flexibility encourages more people to rent rather than buy
- Perhaps parents could lend a helping hand?
Market in Brief
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- New BTL lending has fallen by 81% since 2007
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- Figure 1: Number and value of new BTL mortgages sold, 2003-09
- Rising demand for private rented accommodation
- Conditions are certainly starting to improve
- Buy-to-let versus equity-based investment
- Lending criteria have tightened considerably
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- Figure 2: Availability of BTL mortgage products, by LTV, August 2007 and November 2009
- Three lenders dominate the market
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- Figure 3: Estimated market share of the leading BTL lenders, by new gross advances, Q1 2010
- The BTL market is heavily intermediated
- Just 3% of UK adults own a rental property…
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- Figure 4: Property ownership/intentions, December 2009
- … and around half say that they would never invest in BTL
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- Figure 5: Attitudes towards BTL, December 2009
Internal Market Environment
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- Key points
- The privately rented sector is growing rapidly
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- Figure 6: Household tenure in England, by number of households and proportion of total households, 1961, 1971, 1981, 1991 and 2001-08
- House prices boomed throughout much of the noughties…
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- Figure 7: Index of average mix-adjusted UK house prices (Feb 2002=100), Feb 2002-Oct 2009
- … although prices fell significantly in 2008
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- Figure 8: Percentage annual change* in the index of average mix-adjusted UK house prices, Feb 2003-Oct 2009
- Average prices of rental properties have also fallen…
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- Figure 9: The average value of rented houses and flats – all regions, Q1 2008-Q3 2009
- … but have held up relatively well in London and the South East
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- Figure 10: The average value of rented houses and flats, by region, Q1 2008-Q3 2009
- Rental returns have fallen slightly over the last few years…
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- Figure 11: Rental returns to landlords, Q3 2003-Q4 2009
- … although total ROI has picked up since mid-2008
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- Figure 12: The annual rate of return on BTL, Q1 2006-Q4 2009
- Arrears and repossessions have started to ease
- The potential for mortgage fraud is also a problem
- The majority of landlords are in it for the long term
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- Figure 13: Key landlord demographics, September 2009
- Increased regulation may deter investors…
- … with additional proposals being considered
- The tenancy deposit scheme
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- Figure 14: Tenancy deposit schemes joined by landlords, March 2008
- Calls for regulation of the BTL mortgage market
- Lettings agents dealt a blow by the OFT
Broader Market Environment
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- Key points
- Demographic and social trends have increased rental demand
- The UK finally emerges from recession
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- Figure 15: Quarter-on-quarter growth of real GDP, Q1 2004-Q3 2009
- Low interest rates have helped support the property market
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- Figure 16: UK Inter-bank, three-month rate+ and selected UK bank rates*, Jan 2001-Dec 2009
- Credit conditions are improving
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- Figure 17: Changes in BTL lending spreads, Q2 2007-Q1 2010
Competitive Context
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- Key points
- BTL is a niche type of investment
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- Figure 18: Ownership of savings and investment products, December 2009
- Global stock markets have recovered strongly…
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- Figure 19: Performance of the FTSE 100 and FTSE All Share indices, January 2004-February 2010
- … prompting a rise in sales of investment funds
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- Figure 20: Retail sales of unit trusts and OEICs, by IMA members, 2000-09*
SWOT Analysis
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- Figure 21: Buy-to-Let market – SWOT analysis, 2010
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Who’s Innovating?
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- Key points
- Lenders focusing on risk and pricing, not innovation
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- Figure 22: Changes in BTL market conditions since 2006/07
- Lending criteria are extremely tight at present…
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- Figure 23: Availability of BTL mortgage products, by LTV, August 2007 and November 2009
- … and the number of products available has fallen significantly
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- Figure 24: Number of BTL mortgage products available, August 2007-November 2009
Trade Perspective
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- The private rented sector drives growth in BTL
- The lack of wholesale funding is a major problem…
- … prompting much tighter lending criteria
- Innovation and remortgage activity is lacking at present
- Conditions in the market have started to improve…
- … with most expecting 2010 to be a much better year for BTL
- Market shares and distribution channels
- Regulation and other concerns
Market Size and Forecast
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- Key points
- The BTL market has declined sharply since 2007…
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- Figure 25: Number and value of new BTL mortgages sold, 2003-09
- … although lending did increase in the second half of 2009
- Loans for house purchase take a growing share of the market
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- Figure 26: Breakdown of BTL gross advances (by value), by mortgage type, 2003-09
- Demand for BTL mortgages increased significantly in 2009
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- Figure 27: Changes in demand for BTL mortgages*, Q2 2007-Q1 2010
- Market forecast
- A return to growth in 2010…
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- Figure 28: Forecast growth of the BTL market, by volume and value of new gross advances, 2004-14
- … with lending criteria easing and more competition
Market Share
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- Key points
- A market that has contracted sharply over the last two years…
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- Figure 29: Ten largest buy-to-let lenders, by balances outstanding and gross advances, 2007
- … with fewer products available to investors
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- Figure 30: Summary of the main buy-to-let lenders, by the number of products on the market, March 2010
- Lloyds Banking Group and Nationwide are the market leaders
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- Figure 31: Estimated market share of the leading BTL lenders, by new gross advances, Q1 2010
Companies and Products
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- Major players
- Santander
- Barclays (Woolwich)
- Lloyds Banking Group
- Lloyds TSB
- Halifax
- BM Solutions (Birmingham Midshires)
- Cheltenham & Gloucester
- Northern Rock
- RBS/NatWest
- The Mortgage Works (Nationwide)
Brand Communication and Promotion
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- Key points
- BTL advertising – what advertising?
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- Figure 32: Total BTL adspend, 2005-09
- C&G is the largest advertiser of BTL mortgages
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- Figure 33: Top 20 BTL advertisers (by five-year total sector adspend), 2005-09
- A sector that focuses predominantly on press advertising
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- Figure 34: BTL adspend, by media type, 2005-09
Channels to Market
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- Key points
- The BTL market uses a range of different distribution methods…
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- Figure 35: Main distribution channels used in the BTL market – illustration, 2010
- … with intermediaries accounting for around 85% of all lending
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- Figure 36: Distribution channels used by leading BTL lenders, March 2010
The Consumer – Property Ownership and Intentions
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- Key points
- Just 3% of UK adults own a BTL property
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- Figure 37: Property ownership/intentions, December 2009
- 35-44-year olds are most likely to be landlords…
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- Figure 38: Property ownership/intentions, by various demographics, December 2009
- … as are ABs and high earners
The Consumer – Attitudes towards House Prices and Property in General
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- Key points
- Most predict zero or low growth in house prices this year
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- Figure 39: Performance of property prices over the next year, December 2009
- Landlords are more realistic about house prices…
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- Figure 40: Property ownership/intentions, by performance of property prices over the next year, December 2009
- … while older people are also more bullish about the outlook
- People still have faith in property as a long-term investment
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- Figure 41: Attitudes towards owning property and having a mortgage, December 2009
- Landlords still believe property is a good long-term investment
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- Figure 42: Property ownership/intentions, by attitudes towards owning property and having a mortgage, December 2009
- BTL investors are particularly sensitive about arrangement fees
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- Figure 43: Property ownership/intentions, by attitudes towards arranging a mortgage or remortgage, December 2009
The Consumer – Attitudes towards BTL
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- Key points
- There is a lot of resistance to BTL…
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- Figure 44: Attitudes towards BTL, December 2009
- … although some think that now is a good time to buy
- Landlords are more positive about property investment
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- Figure 45: Property ownership/intentions, by attitudes towards BTL, December 2009
- They are also sympathetic to the frustrations of FTBs
- Affluent individuals are more positive about BTL
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- Figure 46: Attitudes towards BTL, by various demographics, December 2009
- House prices in London are still a key barrier to investors
- The more adventurous investors may be looking to buy
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- Figure 47: Performance of property prices over the next year, by attitudes towards BTL, December 2009
The Consumer – Target Groups
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- Key points
- Potential Buy to Letters are the best target for lenders
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- Figure 48: Target groups, by property ownership/intentions, December 2009
- The Out of Market Majority are unsure about house prices
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- Figure 49: Target groups, by performance of property prices over the next year, December 2009
- The Outright Owning Niche don’t care about mortgages
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- Figure 50: Target groups, by attitudes towards owning property and having a mortgage, December 2009
- Potential Buy to Letters are optimistic about property investment…
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- Figure 51: Target groups, by attitudes towards BTL, December 2009
- … but don’t discount all Outright Owning Nichers
- Potential Buy to Letters are likely to be ABs aged 25-54
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- Figure 52: Target groups, by demographics, December 2009
Appendix – The Consumer – Property Ownership and Intentions
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- Figure 53: Property ownership/intentions, by various demographics, December 2009
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Appendix – The Consumer – Attitudes towards House Prices and Property in General
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- Figure 54: Performance of property prices over the next year: Average scores*, by key demographics, December 2009
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Appendix – The Consumer – Attitudes towards BTL
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- Figure 55: Attitudes towards BTL, by various demographics, December 2009
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- Figure 56: Attitudes towards BTL, by various demographics, December 2009 (continued)
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Appendix – The Consumer – Target Groups
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- Figure 57: Target groups, by demographics, December 2009
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