THE BTL HEATWAVE CONTINUES

It’s been a busy summer across the buy-to-let marketplace. An array of landlords remain well placed to benefit from some highly favourable conditions as competition heats up across the lending arena, rental income is strong and a lack of good quality stock continues to fuel demand. Another important factor within this is improving rental voids and this trend was evident in recent data from Goodlord.

This outlined that the North West saw the biggest month-on-month decrease in void periods in August, with its average dropping from 20 days in July to 18 in August – a decrease of 10%. London and the East Midlands also saw their average void period reduce in August, by one day.

RENTAL ARREARS ON THE DECLINE

It’s no secret that the pandemic has impacted landlords and tenants in many different ways. From a financial perspective, it has placed additional pressure on a variety of businesses and personal incomes. As such, it’s important to chart these personal journeys and form a better understanding of how such entities are coping.

TENANT DEMAND HITS RECORD HIGH

The proportion of landlords reporting increasing tenant demand has hit its highest level since 2016.

Research from Paragon Bank found that just under 39% of landlords have seen increased tenant demand over the past three months, with 18.2% saying it has grown ‘significantly’ and a further 20.3% reporting slight increases. The percentage of landlords seeing growing demand has risen by 8% since the prior quarter and there’s a continuing trend of increasing tenant demand in the form of a 25% rise year-on-year. Additionally, there was a 2% decrease in the proportion of landlords reporting a fall in tenant demand compared to Q1 2021.

THE BTL MARKET IS HOTTING UP

Summer is finally here. For how long we don’t know, but let’s enjoy it while it lasts. And it’s not only the weather which is hotting up.

On the back of robust yields, increased product numbers and competitive rates, it’s no surprise to see confidence rising across the BTL sector and there is little to suggest that this is likely to fall anytime soon, despite the tapering of the stamp duty holiday.

This is a sentiment which was highlighted in recent data from Paragon Bank as it revealed that 53% of mortgage intermediaries expect to see an increase in buy-to-let business over the next 12 months. This figure compares to a figure of 50% – when respondents were asked the same question in Q1 2021 – whilst the proportion expecting declining levels of buy-to-let business remained consistent at 10%.

A RISE IN BTL PRODUCT NUMBERS AND NEW LANDLORDS?

Record-breaking numbers of new prospective tenants are fuelling growing demand for BTL products among UK property investors, with product choice returning closer to pre-pandemic levels.

Newly released figures from Moneyfacts revealed that 2,709 buy-to-let products were recorded at the beginning of July. This was said to be the highest number of BTL options on offer in the buy-to-let sector since 2,897 in March 2020, 971 products higher than July 2020 when availability was limited due to product withdrawals following the start of the pandemic.

Additionally, Moneyfacts found that the average overall two- and five-year fixed buy-to-let rates have fallen when compared to July 2019. However, year-on-year both the two- and five-year fixed average rates for all LTVs are up 0.37% and 0.31% respectively.

A SEISMIC SHIFT IN THE COSTS ASSOCIATED WITH RENTING VS BUYING

In recent years, the consensus of opinion has been that buying a home can often prove cheaper than renting. However, like many things, the pandemic appears to have altered this trend. Despite rents in Great Britain seeing a 7.1% rise over the last 12 months, strong house price growth fuelled by the stamp duty holiday coupled with increases in higher loan-to-value mortgage rates are suggested to have resulted in a big turnaround.

Research from Hamptons outlined that renting is now cheaper than buying a home. This illustrated that people buying with a 10% deposit would have been better off than renters by £102 a month before the pandemic began in March 2020. However, last month, data showed that the average private sector tenant was better off, spending £71 a month less in rent.

THE GREEN MORTGAGE DRIVE

A growing number of landlords, homeowners and tenants are highlighting energy efficiency to help both the environment and keep running costs down. However, in order for green mortgages to really gain traction, an increasing number of lenders must get involved to create genuine competition.

Thankfully, we are seeing a raft of activity across the BTL and residential markets. In Q1, Paragon launched four green further advance products to support landlords in improving the energy performance of their properties. Foundation Home Loans also introduced a ‘Green Reward’ remortgage for landlords to reward those who have paid out to make improvements.

THE BTL SECTOR LEADS THE WAY OUT OF LOCKDOWN

I think it’s safe to say that we are all ready for lockdown restrictions to ease but only if done in a way which doesn’t hinder our freedom in the future. This is the balancing act which the government has faced over the past 12 months and I certainly don’t envy the continued challenges facing the decision makers.

Every business and individual has been forced to make some tricky decisions over this period and landlords are no different. Landlords have been impacted in many different ways and it speaks volumes of the BTL market, lenders and the advice process to see that so many have continued to remain active during this period, although there inevitably remains some degree of caution. According to the National Landlord Index by Accommodation.co.uk, over half (59.8%) of landlords are waiting for lockdown measures to ease before investing in properties.

THE INFLUENCE OF COVID-19 ON THE BUY TO LET MARKET

We all know that Covid-19 has changed business dynamics across a multitude of sectors and the mortgage market is certainly no different. With this in mind, it was interesting to see research from Quotezone – which covered a sample of landlord insurance quotes from 2019 to 2020 – highlight that redundancies and furlough may have created an emerging trend of small and first-time landlords.

Although the majority of the 19,000 landlords sampled reported owning their property for in excess of five years, a more recent spike emerged with properties owned for ‘less than one year’ seeing a 22% year-on-year rise during the pandemic. The data also showed that the average age of a landlord in the UK is 51. It added that, with only 52% of landlords using cash to purchase during 2020 – the lowest figure on record – buy-to-let is an increasingly viable option for many UK buyers.

ADDITIONAL SUPPORT NEEDED FOR TENANTS AND LANDLORDS

The UK Government has recently announced that the ban on evictions in England is to be extended until the end of March. This means that eviction notices – which could have started again on 22 February – cannot be served for another six weeks. The eviction ban had already been extended from 11 January when it was originally due to expire.

The only tenants that will be allowed to be evicted using bailiffs before 31 March will be those that cause the greatest strain on landlords or residents and neighbours. Exemptions include cases of illegal occupation, anti-social behaviour and arrears of six months’ rent or more.

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