Table of Contents
Executive Summary
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- The market
- New loans return to growth in 2018
- Growth driven exclusively by remortgaging activity
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- Figure 1: Forecast of new buy-to-let mortgage advances – Fan chart, 2013-23
- Demand for buy-to-let mortgages continues to be weak
- House prices in England fall for the first time in seven years
- A higher proportion of households own their home
- 30% of people interested in investing in property
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- Figure 2: Interest in property investments, January 2019
- Awareness of indirect property investments is low
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- Figure 3: Awareness of indirect property investments, January 2019
- Latest regulatory and legislative changes
- Companies and brands
- Mixed results among largest lenders in 2018
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- Figure 4: Estimated market share of buy-to-let amounts outstanding, selected lenders, 2018
- Longer fixed-rate deals are becoming more common (and flexible)
- Lenders cut rates and look to make their deals more attractive
- Providers start looking into Open Banking
- Industry taking action to stop discrimination of tenants on benefits
- The consumer
- 6% of people are landlords
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- Figure 5: Ownership of investment property, January 2019
- 7% have owned their investment for less than a year
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- Figure 6: Length of ownership of investment property, January 2019
- Majority of investors likely to stay put
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- Figure 7: Short-term property plans, January 2019
- Changes in personal circumstances main reason to end investment
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- Figure 8: Reasons to stop investing in property, January 2019
- Main concerns relate to covering unanticipated expenses
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- Figure 9: Concerns about investing in property, January 2019
- Recognising the Airbnb opportunity
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- Figure 10: Attitudes towards investing in property, January 2019
- Identifying clusters and target groups
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- Figure 11: Attitudes towards investing in property, cluster groups, January 2019
- What we think
Issues and Insights
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- Certainty and flexibility: remortgaging trends will incentivise switching
- The facts
- The implications
- Market moving towards specialised products and expert advice
- The facts
- The implications
The Market – What You Need to Know
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- New loans return to growth in 2018
- Growth driven exclusively by remortgaging activity
- Demand for buy-to-let mortgages continues to be weak
- Home ownership rose in 2017/18
- 30% of people interested in investing in property
- A tougher environment
Market Size and Forecast
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- Buy-to-let growth slows down
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- Figure 12: Number of buy-to-let mortgages outstanding, and buy-to-let share of total number of mortgages outstanding, 2008-18
- New loans return to growth in 2018
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- Figure 13: Volume and value of new buy-to-let mortgages, 2014-18
- Market forecast: remortgaging activity to drive future growth
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- Figure 14: Forecast of new buy-to-let mortgage advances – Fan chart, 2013-23
- Figure 15: Forecast of new buy-to-let mortgage business, 2013-23
- Forecast methodology
Market Segmentation
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- Growth driven exclusively by remortgaging activity…
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- Figure 16: New buy-to-let mortgages, by purpose of loan, 2014-18
- …which now accounts for over 70% of new business
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- Figure 17: Remortgaging activity as a percentage of total new buy-to-let business, 2014-18
Market Drivers
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- Demand for buy-to-let mortgages continues to be weak…
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- Figure 18: Demand for buy-to-let and prime lending, Q1 2014-Q4 2018
- …and the overall market is becoming tougher for investors and lenders
- Base rate at highest level since the financial crisis
- House prices in England fall for the first time in seven years
- A higher proportion of households own their home
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- Figure 19: England housing stock, by tenure, 2000-2017/18
- Interest in property investments
- A third interested in investing in property
- Mum and Dad: bank or landlords?
- Investing in holiday homes abroad as attractive as in the UK
- Self-build and renovation projects as an investment
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- Figure 20: Interest in property investments, January 2019
- Awareness of indirect property investments
- Awareness is low
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- Figure 21: Awareness of indirect property investments, January 2019
- The potential of property-backed and innovative finance ISAs
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- Figure 22: Propio’s property IFISA London Underground Ad, March 2019
Regulatory and Legislative Changes
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- A tougher environment
- HMO mandatory licensing is extended
- Changes introduced in the 2019/20 tax year
- Phasing out of tax relief enters third stage…
- …and new tax credit now applies to 75% of mortgage interest
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- Figure 23: Schedule of changes to tax relief available to landlords, 2017/18-2020/21
- CGT allowance reaches £12,000
- Homes Act comes into force
- Rules introduced to protect money held by agents
- Ban on letting fees to take effect
- All rental properties to have a minimum ‘E’ EPC rating
- Parliamentary inquiry into ‘No DSS’ restrictions
Companies and Brands – What You Need to Know
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- Mixed results among largest lenders in 2018
- Longer fixed-rate deals are becoming more common (and flexible)
- Lenders cut rates and look to make their deals more attractive
- Providers start looking into Open Banking
- Industry taking action to stop discrimination of tenants on benefits
Market Share
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- LBG and RBS lose market share…
- …as competitors step up
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- Figure 24: Buy-to-let amounts outstanding, by selected lenders and estimated market share, 2015-18
- Coventry BS and Paragon report positive performance
Competitive Strategies
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- Longer fixed-rate deals are becoming more common (and flexible)
- Paragon introduces online product switching feature
- Lenders have been cutting rates…
- …and exploring other ways to make their deals more attractive
- Dedicated-purpose mortgages reflect a more complex market
- HMO BTL
- Expat BTL
- Holiday BTL
- Refurb BTL
- Industry taking action to stop discrimination of tenants on benefits
Launch Activity and Innovation
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- Providers start looking into Open Banking
- Mojo developing Mortgage Matcher with Open Banking
- Other Open Banking developments and partnerships
- Digital-only Molo launches with buy-to-let mortgages
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- Figure 25: Molo Finance advertising
- New entrants catering for professional landlords…
- …and limited companies
- Shawbrook Bank extends access to eTech BTL hub
The Consumer – What You Need to Know
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- 6% of people are landlords
- 7% have owned their investment for less than a year
- Majority of investors likely to stay put
- Changes in personal circumstances main reason to end investment
- Main concerns relate to covering unanticipated expenses
- Recognising the Airbnb opportunity
- Identifying clusters and target groups
Ownership of Investment Property
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- 6% of people are landlords
- A further 7% are interested in buying investment property
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- Figure 26: Ownership of investment property, January 2019
- Length of ownership of investment property
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- Figure 27: Length of ownership of investment property, January 2019
Funding of Investment Property
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- 51% of investors used a mortgage
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- Figure 28: Funding of investment property, January 2019
Short-term Property Plans
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- Three in 10 are considering rent rises
- 27% have considered selling up
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- Figure 29: Short-term property plans, January 2019
- Mortgage-specific plans
Reasons to Stop Investing in Property
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- Personal circumstances the main reason to stop investing
- A third would be influenced by market conditions
- 27% wouldn’t stop investing in property
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- Figure 30: Reasons to stop investing in property, January 2019
Concerns about Investing in Property
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- Main concerns relate to covering unanticipated expenses…
- …and less so to market conditions
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- Figure 31: Concerns about investing in property, January 2019
- Addressing ethical concerns
- Indirect property investments as an alternative
- Older generations more likely to have multiple concerns
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- Figure 32: Repertoire of concerns about investing in property, by generation, January 2019
Attitudes towards Investing in Property
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- Parents are a key demographic…
- …but men need more reassurance
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- Figure 33: Attitudes towards investing in property, January 2019
- Recognising the Airbnb opportunity…
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- Figure 34: Agreement with “Companies such as Airbnb make it easier than ever to profit from secondary property” – CHAID – Tree output, January 2019
- …and supporting prospective investors
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- Figure 35: Airsorted’s London Underground Ad, April 2019
Target Group Analysis
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- Identifying clusters and target groups
- Typical characteristics of each cluster
- Unconvinced
- Pessimistic
- Circumstantial
- Pragmatic
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- Figure 36: Attitudes towards investing in property, cluster groups, January 2019
- Interest in investing in property, by cluster groups
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- Figure 37: Interest in property investments, by cluster groups, January 2019
- Concerns about investing in property, by cluster groups
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- Figure 38: Concerns about investing in property, by cluster groups, January 2019
Appendix – Data Sources, Abbreviations and Supporting Information
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- Abbreviations
- Supporting information: outline of regulatory changes
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- Figure 39: Summary of tax and regulatory changes affecting the buy-to-let market, 2016-17
- Figure 40: Stamp duty land tax rates for residential and additional properties, from April 2016
- Consumer research methodology
- CHAID analysis methodology
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- Figure 41: Property as an investment – CHAID – Table output, January 2019
- Cluster analysis methodology
- Cluster analysis group definitions
- Positive views:
- Negative views:
Appendix – Market Size and Forecast
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- Total market value forecast – Best- and worst-case scenarios
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- Figure 42: Forecast of buy-to-let mortgage advances – Best- and worst-case scenarios, at current prices, 2018-23
- Forecast methodology
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