Table of Contents
Overview
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- What you need to know
- Market definition
Executive Summary
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- The market
- Stamp duty increase and regulatory changes hit buy-to-let market
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- Figure 1: Forecast of new buy-to-let mortgage advances – Fan chart, 2012-22
- Remortgage business will drive future growth
- Recent regulatory and tax changes impacting market
- Tenant demand remains strong
- New investors may be deterred by higher interest rates
- Companies and brands
- LBG and Nationwide are the largest buy-to-let lenders
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- Figure 2: Share of buy-to-let market, by amounts outstanding (selected lenders), 2017
- The market attracts some new entrants
- Lenders respond differently to changing market forces
- The consumer
- 5% of UK adults own a second property…
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- Figure 3: Number of properties owned, April 2018
- …15% of these inherited their property
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- Figure 4: Reasons for owning second home or rental property, April 2018
- 39% are expecting to sell a second property in the next two years
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- Figure 5: Short-term property plans, April 2018
- Longer-term plans
- Many buy-to-let investors are feeling the pressure
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- Figure 6: Attitudes towards buy-to-let investment by existing investors, April 2018
- 45% of rental property owners are concerned about interest rates rising
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- Figure 7: Mortgage ownership, tax status change, and concerns about borrowing rates, April 2018
- 80% of second property owners say buying property is a good long-term investment
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- Figure 8: Agreement with statements about property investment and second home ownership, April 2018
- 11% of non-owners want to buy a second property within two years
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- Figure 9: Proportion of non-second home owners who are planning to buy additional/investment property, April 2018
- What we think
Issues and Insights
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- Scope to target first-time property owners
- The facts
- The implications
- Owning a second home is a popular aspiration, but many could be hampered by a less favourable regulatory and tax environment
- The facts
- The implications
The Market – What You Need to Know
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- Buy-to-let accounts for 17% of all mortgages but lending fell last year…
- …due to reduced demand for house-purchase loans…
- …linked to adverse changes to tax and regulation
- The market will continue to be sustained by strong tenant demand
- New investors may be deterred by higher interest rates
Market Size and Forecast
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- Buy-to-let represents 17% of all mortgages
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- Figure 10: Number of buy-to-let mortgages outstanding, 2006-17
- 2017 sees first fall in new business since 2009
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- Figure 11: Volume and value of new buy-to-let mortgages, 2013-17
- Market outlook: future growth driven by remortgage market
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- Figure 12: Forecast of new buy-to-let mortgage advances – Fan chart, 2012-22
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- Figure 13: Forecast of new buy-to-let mortgage business, 2013-22
- Forecast methodology
Market Segmentation
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- Far fewer loans for house-purchase taken out in 2017
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- Figure 14: New buy-to-let mortgages, by purpose of loan, 2013-17
- Remortgage activity should remain strong, over the short term at least…
- …although some landlords may find the stricter lending rules a problem
Market Drivers
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- Ownership of second homes
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- Figure 15: Second properties owned in the UK or abroad, 2013-14
- What makes property so alluring?
- It’s tangible
- It’s a good long-term investment
- It can be passed on
- There is strong tenant demand for private rented property
- Becoming a property investor has become much more difficult
- Could interest in overseas investment increase?
- Significant increase in more serious buy-to-let arrears, but total number still only accounts for a tiny fraction of all mortgages
- Demand for buy-to-let mortgages expected to weaken in 2018…
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- Figure 16: Demand for buy-to-let and prime lending (quarterly basis), Q1 2012-Q1 2018
- …while spreads are predicted to narrow significantly
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- Figure 17: Spreads on buy-to-let lending (quarterly basis), 2012-17
Regulatory and Legislative Changes
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- Tax changes and tighter lending rules create a tougher environment
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- Figure 18: Summary of tax and regulatory changes affecting the buy-to-let market, 2016 onwards
- Figure 19: Stamp duty land tax rates for residential and additional properties, from April 2016
- Figure 20: Schedule of changes to tax relief available to landlords, 2017/18-2020/21
- Unoccupied second homes face higher council tax bills
Companies and Brands – What You Need to Know
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- The largest lenders…
- …and the best performers
- New arrivals
- Different lenders adopt different strategies
Market Share
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- Largest lender, LBG, sees further erosion of market share
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- Figure 21: Buy-to-let amounts outstanding by selected lenders and estimated market share, 2014-17
- Nationwide and RBS both see fall in new buy-to-let lending in 2017
- Barclays sees strong rise in buy-to-let balances in 2017
- Significant others
Competitive Strategies
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- A crowded market but with scope for new entrants to emerge
- More lenders target ‘consumer’ market
- Others focus on limited companies and professional landlords
- Barclays targets first-time buyer landlords
- Precise Mortgages launches income supported buy-to-let deal
- Lenders start to soften their criteria to ease supply pressures…
- …while some lenders withdraw support for portfolio landlords
The Consumer – What You Need to Know
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- 5% of UK adults own a second property…
- …15% of these inherited their property
- 39% are expecting to sell a second property in the next two years
- Many buy-to-let investors are feeling the pressure
- 11% of non-owners want to buy a second property within two years
Ownership of Financial and Property Assets
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- A small proportion of UK adults own a second property…
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- Figure 22: Ownership of financial and property assets, April 2018
- …and this is largely the preserve of the wealthy
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- Figure 23: Proportion who own a second/holiday home or rental property, by socio-economic group and gross annual household income, April 2018
- Most of those with a second home or rental property are owner-occupiers
- Two fifths of multiple property owners own property abroad
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- Figure 24: Type of property owned, April 2018
- Just 9% of rental/second property owners have four or more properties
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- Figure 25: Number of properties owned, April 2018
Reasons for Owning Second Property
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- 45% of buy-to-let investors are investing for income, while 40% see it as long-term investment
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- Figure 26: Reasons for owning second home or rental property, April 2018
- 12% intend to eventually move into their investment or second property
- 14% have bought additional property for a child at university
Short- and Long-term Plans
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- More intend to sell than buy
- Mortgage intentions
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- Figure 27: Short-term property plans, by owner type, April 2018
- 8% intend to turn a second property into their main residence
- Only half are intending to ultimately sell up
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- Figure 28: Long-term investment property plans, by owner type, April 2018
- A third intend to pass on the property to family or others
Buy-to-let Investors – Attitudes and Experiences
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- Buy-to-let lenders are starting to feel the pressure…
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- Figure 29: Attitudes towards buy-to-let investment by existing investors, April 2018
- …45% are concerned about future rise in interest rates
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- Figure 30: Mortgage ownership, tax status change, and concerns about borrowing rates, April 2018
- Growing interest in switching status to a limited company
Attitudes toward Investing in Property
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- 65% of second property owners think the stamp duty surcharge is unfair
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- Figure 31: Agreement with statements about property investment and second home ownership, April 2018
Prospective Buy-to-let Investors and Second Home Owners
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- Fairly even interest in overseas as in UK property
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- Figure 32: Proportion of non-second home owners who are planning to buy additional/investment property, April 2018
- Interest in buy-to-let remains healthy
Appendix – Data Sources, Abbreviations and Supporting Information
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- Abbreviations
- Consumer research methodology
Appendix – Market Size and Forecast
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- Total market value forecast – best- and worst-case scenarios
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- Figure 33: Forecast of buy-to-let mortgage advances – best- and worst-case scenarios, at current prices, 2017-22
- House-purchase sector forecast
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- Figure 34: Forecast of new buy-to-let house-purchase advances – Fan chart, 2012-22
- Figure 35: Forecast of buy-to-let house-purchase advances – best- and worst-case scenarios, at current prices, 2017-22
- Remortgage sector forecast
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- Figure 36: Forecast of buy-to-let remortgage advances – Fan chart, 2012-22
- Figure 37: Forecast of buy-to-let remortgage advances – best- and worst-case scenarios, at current prices, 2017-22
- Forecast methodology
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