Table of Contents
Executive Summary
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- The market
- Buy-to-let gross lending up by 32% in 2013
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- Figure 1: Forecast of new buy-to-let mortgage advances – fan chart, 2008-18
- Rental market continues to expand
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- Figure 2: Key market fundamentals, 2007, 2010 and 2013 (year-end)
- New business lending is expected to grow at a solid pace over the next few years
- Market factors
- Strong demand for rental property in the UK
- Market fundamentals
- Regulation update
- Company, brands and innovation
- Leading lenders
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- Figure 3: Lenders’ share of the buy-to-let market, by balances outstanding, 2013
- Greater product activity
- Limited adspend due to dominance of intermediated sales
- The consumer
- One in twenty UK adults are landlords
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- Figure 4: Proportion of UK adults who let property, December 2013
- Means of acquisition
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- Figure 5: How acquired rental property, December 2013
- Buy-to-let borrowers favour interest-only
- Buy-to-let investment intentions
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- Figure 6: Intentions regarding buy-to-let property investment, December 2013
- What landlords think about investing in buy-to-let
- House price predictions
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- Figure 7: Expected property price movement over the next 12 months, December 2013
- What we think
Issues in the Market
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- Contraction in mainstream interest-only mortgages could see more landlords switching to buy-to-let deals
- The facts
- The implications
- Good expansion potential
- The facts
- The implications
Trend Application
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- Target mortgage holders with buy-to-let promotions
- Explore the viability of crowd-funding and co-ownership
- Young people can use buy-to-let as a gateway into the property market
Market Drivers
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- Key points
- Buy-to-let mortgage demand is relatively strong
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- Figure 8: Demand for buy-to-let and prime lending, 2009-13
- Spreads on buy-to-let lending fell during the final three quarters of 2013
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- Figure 9: Spreads on buy-to-let lending – retrospective and forward-looking, 2009-13
- Lenders continue to see decent margins on new lending
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- Figure 10: Bank of England base rate, three-month (monthly average) LIBOR and effective new mortgage rate, January 2007-December 2013
- Housing market conditions improve
- Rental demand and supply
- Void periods, tenant defaults and loan arrears
- Average value of rented property grew in 2013
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- Figure 11: Average value of rented houses versus rented flats, Q1 2008-Q4 2013
- Geared investments offer better returns than cash buys
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- Figure 12: Average net annual compound rate of return over five years – geared versus cash purchase investment, Q1 2008-Q4 2013
- Regional variation in geared-investment returns
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- Figure 13: Annual compound rates of return on buy-to-let investment over a five-year period – geared investments only, by region, Q4 2013
- Landlord characteristics and behaviour
- Recent regulatory and policy developments
UK Housing Stock
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- Key points
- The privately rented sector accounts for one in eight UK properties
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- Figure 14: UK Housing stock, by tenure, 1991-2012
- The number of reluctant landlords appears to be on the wane
- Buy-to-let mortgages are funding nearly one in three privately rented homes
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- Figure 15: Share of UK privately rented dwellings that are being purchased with a buy-to-let mortgage, 2002-12
- Sharp drop in new private builds exacerbates housing shortage
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- Figure 16: Number of permanent dwellings completed, by tenure – UK, 2006/07-12/13
Market SWOT Analysis
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- Figure 17: Buy-to-let mortgage market – strengths, weaknesses, opportunities and threats, 2014
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Who’s Innovating?
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- Key points
- Product availability increases
- Competition hots up
- New lender enters buy-to-let arena with a ‘unique’ proposition
Market Size and Forecast
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- Key points
- There are now over 1.5 million buy-to-let loans outstanding
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- Figure 18: Number and value of buy-to-let mortgages outstanding, 2007-13 (year-end)
- New buy-to-let advances grew strongly in 2013
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- Figure 19: Volume and value of new buy-to-let mortgages, 2007-13
- The growth was driven by both remortgage and house-purchase activity
- Mintel expects the market to continue to grow over the next five years
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- Figure 20: Forecast of new buy-to-let mortgage advances – fan chart, 2008-18
- Figure 21: Forecast of the number of new buy-to-let mortgage sales – fan chart, 2008-18
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- Figure 22: Forecast of new buy-to-let mortgage business, 2008-18
- Forecast methodology
- Fan chart explanation
Market Share
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- Key points
- Two lenders dominate the buy-to-let market
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- Figure 23: Buy-to-let amounts outstanding – selected lenders only, 2011-13
Companies and Products
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- Lloyds Banking Group
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- Figure 24: Key annual financial data for LBG, 2012-13
- Nationwide and TMW
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- Figure 25: Key interim financial data for Nationwide, H1 2012 and H1 2013
- Paragon
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- Figure 26: Key annual financial data for The Paragon Group, 2012 and 2013
Brand Communication and Promotion
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- Key points
- Overall mortgage adspend has increased over the past year
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- Figure 27: Total advertising expenditure on mortgage products, by sub-category, 2009-13
- Limited buy-to-let advertising
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- Figure 28: Adspend on buy-to-let mortgages, by selected advertisers and media type, 2013
Channels to Market
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- Key points
- Intermediaries play a major role in the distribution of buy-to-let loans
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- Figure 29: Distribution channels used by selected buy-to-let lenders, February 2014
- Intermediary share growing steadily in the wider mortgage market
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- Figure 30: Proportional distribution of regulated mortgage sales, by channel, 2007/08-2012/13
Ownership of Rental Property
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- Key points
- Survey background
- One in 20 UK adults are landlords
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- Figure 31: Ownership of property which is let to tenants or holiday let, December 2013
- A small proportion of tenants are also landlords
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- Figure 32: Ownership of property which is let to tenants or holiday let, by tenure, December 2013
- Mortgage holders are more inclined to invest in buy-to-let
- Buy-to-let landlords are typically ABC1s aged 45-64
- Just under a third of landlords are aged 25-44
Means of Acquiring Rental Property
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- Key points
- Around one in seven inherited their rental property or holiday home
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- Figure 33: How acquired rental property, December 2013
- A large minority initially bought their rental property with a standard residential mortgage
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- Figure 34: Type of mortgage used to buy rental property, December 2013
- Interest-only is the most common type of buy-to-let loan
Attitudes and Intentions Relating to Property Investment
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- Key points
- Many people have aspirations to become property investors
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- Figure 35: Attitudes and intentions regarding buy-to-let property investment, December 2013
- One in seven landlords believe now is a good time to invest in buy-to-let
House Price Predictions
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- Key points
- Most people expect house prices to grow in 2014
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- Figure 36: Expected property price movement over the next 12 months, December 2013
Appendix – Market Size and Forecast
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- Value forecast – best- and worst-case scenarios
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- Figure 37: Forecast of new buy-to-let advances – best- and worst-case scenarios, at current prices, 2013-18
- Volume forecast – best- and worst-case scenarios
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- Figure 38: Forecast of the number of new buy-to-let mortgages – best- and worst-case scenarios, at current prices, 2013-18
Appendix – Ownership of Rental Property by Demographics
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- Figure 39: Ownership of rental property, by demographics, December 2013
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Appendix – Attitudes and Intentions Regarding Buy-to-Let Investment
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- Figure 40: Intentions regarding buy-to-let property investment, by demographics, December 2013
- Figure 41: Attitudes regarding buy-to-let property investment, by demographics, December 2013
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Appendix – Profile of Existing Landlords and Prospects
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- Figure 42: Demographic profile of total sample versus existing landlords and buy-to-let prospects, December 2013
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Appendix – House Price Predictions
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- Figure 43: Expected property price movement over the next 12 months, by demographics, December 2013
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