A shift in the rental landscape

Our mortgage book shows that landlords are not only seeking better yields by searching beyond their own regions but also reversing the trend of buying more flats than terraced properties.

Buying more terraced properties

Between February to August this year, our mortgage book for new loans averaged 36% for flats and 41% for terraced housing, including end of terrace. When compared to the same period last year flats accounted for 47% of our BTL loans with terraces at 27%. The rest of the loans are on semi-detached houses followed by detached plus a handful of bungalows and cottages.

Landlords are also buying properties with more rooms. Some of this has to do with the increasing popularity of HMOs but, the pandemic has also highlighted that space is now much more important to buyers and renters. People want a spare room to use as a home office – and that is the case for those who rent or own property.

Market forces, not landlords, responsible for increased rents

It is being reported by Hamptons that the proportion of BTL sales during the SDLT holiday didn’t rise significantly because landlords were outbid by private buyers. However, this is not reflected in our experience as a lender with the March to September business figures this year being some of our best ever.

Anecdotal evidence among our peers also suggests that they would support our findings.

There is a strong possibility that the major high street lenders, who are not specialists in Buy to Let but are responsible for much of the retail demand for BTL funding were not receiving the volumes expected.

 It’s also said that one of the factors behind the average increase in rental costs was that landlords were not as active as retail buyers which led to a further imbalance between supply and demand.

 We believe that the rise in house prices allied to affordability criteria have done far more to push would-be buyers back into seeking a rental solution.

 While some would say that the SDLT holiday was therefore wasted on landlords, we would disagree.

Among the plus points has been the re-emergence of small landlords buying a single property for rent or as small portfolio lenders with less than four properties. It’s also encouraging to see first time landlords stepping into the market. The private rental sector needs a stimulus of new blood and the SDLT holiday has been a major catalyst to that end.

For more information or to discuss any of your BTL cases please get in touch using our BDM finder.