Dissertation Writing Help -Issues in the Buy-to-Let in UK Market
The
buy-to-let mortgage market is a little over a decade old. In that time it has
galvanised the UK rental market, fostering significant increases in the
availability and quality of rented accommodation. What was once a market in the
hands of companies, institutions and specialist investors has increasingly
shifted to one controlled by individual landlords. The buy-to-let sector has
ridden the wave of the UK housing market. The UK’s love affair with owning
bricks and the easy (too easy) availability of finance have made the returns
from property investment attractive to individual investors.
But
2007 was a significant watershed for the buy-to-let market and the UK housing
market generally. Since Q3 2007, the finance tap has been turned off from the
housing market, leading to sharp falls in house prices. Fortunately,
experienced landlords take a long-term view of the return on their investments,
so despite declining capital gains, many are sticking with the market judging
that growth will return in 2009 or 2010. However, there remains uncertainty as
to when recovery will set in and the rapid increase in the supply of rental
properties is now forcing rent levels down across the UK.
Drawing
on a comprehensive range of information sources, this report seeks to answer
these questions. The report additionally offers:
●
an
investigation into the internal and broader macroeconomic factors impacting on
the market, including changing social and demographic trends
●
an
overview of the market’s competitive context, its strengths and weaknesses,
insights and opportunities
●
the
views of leading experts
●
an
examination of recent and projected market growth
●
an
appraisal of the supply side of the market, including market shares of the
largest lenders
●
a
review of product innovation, distribution and promotion
●
an
overview of general consumer financial activity
●
the
results of Mintel’s independently commissioned consumer research, which offers
insight into the leading characteristics, attitudes and behaviours of
homeowners and (actual and potential) buy-to-let investors
●
special
further analysis (using cluster modelling) to enable deeper understanding of
the core target market.
Key issues
In
2008, there was an explosion in the number of landlords in the UK, largely
resulting from a rapid rise in reluctant landlords. What will this mean for the
BTL market and can it be sustained?
Given
the current credit crunch, are individuals and landlords in particular still
looking for opportunities in the market? More importantly, can landlords ride
out the current storm?
The
wholesale funding market has dried up, so how have the major players in the
market coped and what impact has the crunch and nationalisation of major
financial institutions had on the BTL market?
In
2008, innovation and new product development has been a low priority. Does this
mean future innovation could be limited?
Future Opportunities
Being unexciting
In
today’s market environment, the last thing a financial institution wants to be
seen as is risk taking or even dynamic. Mintel’s Inspire database highlights
Nationwide’s recent campaign that aims to reassure customers in the tumultuous
economic climate. The tagline 'Solid. Stable. Dependable. Exciting aren't we?'
appears on billboards and online.
Trust
is an important component of any relationship between a customer and a brand,
but with the fallout from the credit crunch, most financial services providers
will have an especially difficult time rebuilding that component of their
relationship.
Customers
need reassurance, stability and to see the brands that they have invested in to
be solid and unmoveable despite the uncertainty that has coloured the market.
You must also get the message and
customer service right
Mintel’s
research for this report shows that many landlords have lost trust in their BTL
lenders to act in their best interests. But customer service is an important
driver of market share in this market.
●
In targeting existing landlords for future sales,
mortgage providers are likely to face competition from self-financing. Lower
mortgage rates alone will be much less a driver of investment for these
potential future investors than it is for, say, those waiting for better
economic conditions.
●
Improved customer service and a willingness to help
landlords through the current credit crisis could help mortgage lenders
re-establish their credibility with the BTL market.
●
The providers best able to provide the levels of
service demanded and lend a sympathetic ear to landlords struggling at the
moment could establish a strong USP in the BTL market, which would bear fruit
once the housing market started to recover.
But boring does not mean doing
nothing
With
landlords still showing an appetite for the BTL market, this indicates the
potential for buying the loan book of ex or struggling BTL mortgage providers.
●
For lenders, purchasing good quality loan portfolios
from the likes of Bradford & Bingley is one way to boost market share in
anticipation of renewed growth in 2009-11.
●
Assuming only good quality loans are acquired, it gives
the purchaser a pool of eager BTL investors who can be sold to once the current
crisis is over.
●
Of course, in buying such a portfolio, a purchaser must
get the timing right and have the finance in place.
●
In addition, the risk assessment models used to value
the portfolios purchased are in need of major improvement as the sub-prime
securitised debt crisis demonstrates.
Renting a lifestyle option?
Renting
is set to become a growing feature of the UK housing market for both practical
and psychological reasons. Mintel’s Inspire database shows that there are signs
people are becoming less motivated by owning 'stuff' and are more concerned
with expressing fashion and glorifying transience: this suggests renting could
become a lifestyle choice.
This
is a sign of changing behaviour with regard to permanence versus transience. We
are seeing a move that indicates and gives more credence to the tendency
towards the transient and the disposable.
But
it is not mere obsolescence in the sense of a technology that is worn out or
outmoded: it is an acknowledgment of a deeper truth, that the neuroscientists
have confirmed once and for all that we are creatures of emotion, using
rationality only as a final endorsement of what we feel.
Our
emotions are more likely to be ephemeral and flexible. So it is entirely human
to crave change, fashion and flux.
The long-term prospects look good
Research
for this report shows that the BTL market is still seen as an attractive
investment opportunity by up to 23% of adults. These Raring to go individuals
still see value in owning a property for investment purposes.
●
Once current market conditions improve and the
reluctant landlords exit, there will be a healthy supply of new (younger)
investors to replace existing (older) investors who choose to divest.
●
These younger investors will have a greater need of
mortgage borrowing than the older age groups, who are more likely to have
savings or other assets to draw on.
●
If only a small proportion of the 23% of adults who
seem predisposed to buy-to-let investment – ie Raring to go – can be encouraged
into the market, it should continue to expand in the coming years.
●
For those waiting to time their investment until economic
conditions improve, the mortgage offer is of prime importance and providers
might want to introduce special LTV offers for first-time buyers once market
conditions start to improve, as long as prudence is maintained.
Think of the cross-sell opportunities
There
are growing cross-sell opportunities in the financial services and allied
industries. BTL mortgage providers should consider developing complete landlord
packages, encompassing mortgage, energy supply, insurance and even legal
advice. Mortgage brokers are already looking to expand the areas in which they
advise into energy supply.
●
BTL mortgage providers that are part of larger groups
can use the mortgage sale as an opportunity to cross-sell other financial
products and vice versa. BTL mortgage providers and brokers can expand their
business base to generate incremental sales.
●
There may even be prospects for developing BTL
property-based pension schemes. While residential property cannot be held in a
SIPP, there is nothing to prevent a BTL investor from investing his/her rental
income in a private pension plan. Can a pension scheme be developed to
automatically sweep rental income into a private pension plan?
