Table of Contents
Introduction and Abbreviations
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- BTL property sector expands rapidly
- Scope of the report
- Global information and research
- Consumer research
- ACORN
- Abbreviations
Premier Insight
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- Parents are buying accommodation for their student offspring
- Positive sentiment should be tied to change in regulations
- Regional variations should focus marketing activity
- ‘Fly-to-let’ will become more popular and provide financing opportunities
- More flexible lending criteria should attract potential new investors
Executive Summary
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- Strong demand for rental property should be sustained
- Low levels of first-time buyers will improve the prospects for this sector
- The market slows in the second half of 2004
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- Figure 1: Illustration of buy-to-let mortgages outstanding in value and volume terms, 1999-2004
- Rates of return and yields edge up after period of decline
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- Figure 2: Rental yield average for England and Wales, May 2003-November 2004
- More lenders now target this sector
- A nation of property owners
- Pro-property sentiment is strong
- BTL as retirement planning tool
- Typologies indicate varying levels of interest
- Cluster 1 – Sound Investments (13% of sample)
- Cluster 2 – Opportunists (11% of sample)
- Cluster 3 – Anti Buy-to-Let (62% of sample)
- Cluster 4 – Financial Risk Fears (6% of sample)
- Cluster 5 – Tenant Traumas (8% of sample)
- Youngsters and the middle-aged believe BTL is a sound investment
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- Figure 3: Five typology groups regarding BTL, by gender, age and socio-economic group, December 2004
Market Factors
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- Privately rented sector increases by 0.5 million households
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- Figure 4: Number of English households, by tenure, 1991-2003
- Change in rules stimulates the market
- Demographic changes may sustain the rental sector
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- Figure 5: Number of one-person households and age participation index in Higher or Further Education, 2000-09
- Rate rises may deter some potential landlords
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- Figure 6: Bank of England base rate, 1992-2005
- House prices doubled between 1997 and 2003
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- Figure 7: Mix-adjusted housing prices, by region, 1991-2003
- Low numbers of first-time buyers will help the BTL sector
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- Figure 8: Proportion of loans accounted for by first-time buyers and house price/earnings ratio, 1995-2004
- Average weekly rents in the region of £120
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- Figure 9: Weekly mean rents among private sector renters, net of services, 1993/94-2002/03
- Distinct regional variations
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- Figure 10: Weekly mean rents among private sector renters, net of services, by government office region, 2001/03
- Property as the new pension
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- Figure 11: Responses to statement ‘I would rather invest my money in property than savings products’, by gender, age and socio-economic group, November 2004
- Consumers in London and the South favour property investment
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- Figure 12: Responses to statement ‘I would rather invest my money in property than savings products’, by TV region and working status, November 2004
- Amendment to the SIPP rules will boost market
Market Size and Trends
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- New mortgage business grew by 5.3% in 2004
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- Figure 13: New mortgage business, gross advances, 1997-2004
- Buy-to-let mortgage business worth in excess of £50 billion at the end of 2004
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- Figure 14: Buy-to-let mortgages outstanding and gross new advances, 1999-2004
- Growth in new business levels slows in the second half of 2004
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- Figure 15: Changes in value and volume of gross new advances, 1999-2004
- BTL business represents a growing proportion of gross new advances
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- Figure 16: Buy-to-let gross new advances as proportion of gross mortgage lending, 1999-2004
- Average new buy-to-let advance stabilises at around £100,000
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- Figure 17: Average value of new BTL mortgage, 1999-2004
- BTL arrears levels begin to creep up
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- Figure 18: Proportion of mortgages at least three months in arrears, 1998-2004
- Housing market slowdown will diminish growth in the BTL sector
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- Figure 19: Forecast summary of the main housing market indicators, 2003-07
Profitability and Investor Profiles
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- Rates of return recover
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- Figure 20: Rates of return on BTL properties, by cash purchase and geared investment, Q4 2003-Q4 2004
- Rental yields generally declined over the last 18 months
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- Figure 21: Rental yield average for England and Wales, May 2003-November 2004
- Regional variations
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- Figure 22: Variations in rental yields and returns on initial investments, by region, 2003 and 2004
- Professional landlords dominate in terms of influence
- Influx of recent landlords
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- Figure 23: Survey responses to ‘For how many years have you been a residential landlord?’, December 2004
- Most landlords have one or two properties
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- Figure 24: Survey responses to ‘How many rented residential properties do you currently have in your portfolio?’, December 2004
- Many are investing for the future
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- Figure 25: Survey responses to ‘Why did you first decide to invest in residential property?’, December 2004
Products and Providers
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- BTL loan interest rates become more competitive
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- Figure 26: Spot rates for mainstream mortgages and BTL loans, January 2005
- LTVs fall as yields decline
- The BTL market opens up
- Birmingham Midshires and Mortgage Express lead the way
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- Figure 27: Largest buy-to-let providers, 2003 and 2004
- Mortgage Express
- Birmingham Midshires
- Paragon Group
- The Mortgage Business
Distribution
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- Mainstream mortgage distribution is changing
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- Figure 28: Distribution estimate for mortgages, January 2005
- Potential landlords will tend to visit intermediaries
- BTL investors seek specialist advice
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- Figure 29: Sources used to get information before arranging a mortgage/remortgage, December 2004
Advertising and Promotion
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- Norwich Union promotes its equity release product
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- Figure 30: Advertising expenditure on mortgages and related products, years to December 2003 and December 2004
- Buy-to-let adspend is subdued
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- Figure 31: Advertising expenditure on buy-to-let mortgages, December 2004
Consumer Financial Activity
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- Activity levels are down
- Relationship with the main financial services providers
- Saving and investment activity is set to slow
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- Figure 32: Savings, investment, borrowing and debt repayment – consumers’ expected activity, September 2003-December 2004
- Above-average activity from those aged 40-49
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- Figure 33: Expected financial activity, by socio-demographic and income groups, December 2004 and average for the last 12 quarters
- Consumers are placing a deposit, but not much else
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- Figure 34: Leading financial activities planned in the next six months, December 2003-December 2004
- Mortgage demand reflects slowdown in the property sector
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- Figure 35: Intended mortgage and property purchase activity, June 2002-December 2004
- The position primarily unchanged among MFSPs
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- Figure 36: Leading main financial services providers’ market shares, December 2003-December 2004
- RBS set to benefit from increased mortgage activity
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- Figure 37: Saving, investment and lending market sizes, by expected customer demand and brand leaders (overall % intending to undertake activity in brackets), December 2004
- RBS customers remain the most active – NatWest can also expect high business levels
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- Figure 38: Activity levels of main financial providers’ customer bases, December 2004
The Consumer
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- A nation of property owners
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- Figure 39: Property ownership and intentions among the sample, December 2004
- In the region of 1 million adults active in the BTL sector
- Pro-property sentiment emerges
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- Figure 40: Attitudes towards owning property and property as an investment, December 2004
- BTL profile and potential targets
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- Figure 41: Profile of entire sample, those with a second property and those who think rental income is a good way of earning money, December 2004
- A whole new breed of BTL-ers?
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- Figure 42: Attitudes towards owning property and property as an investment, by gender, age and socio-economic group, December 2004
- Home is where the family is
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- Figure 43: Attitudes towards owning property and property as an investment, by lifestage and Mintel’s Special Groups, December 2004
- The North West, Yorkshire/North East and the South are ‘hot spots’
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- Figure 44: Attitudes towards owning property and property as an investment, by region, December 2004
- Home buyers are convinced prices will rise
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- Figure 45: Attitudes towards owning property and property as an investment, by working status, gross annual household income and tenure, December 2004
- Mid-market tabloid readers see the future in property
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- Figure 46: Attitudes towards owning property and property as an investment, by new technology users, newspaper readership, commercial TV viewing and supermarket usage, December 2004
- Saving for retirement a key reason to buy-to-let
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- Figure 47: Attitudes towards owning property and property as an investment, by property ownership and intentions among the sample, December 2004
Consumer Attitudes and Targeting Opportunities
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- A minority of consumers have an opinion about BTL
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- Figure 48: Specific attitudinal statements regarding buy-to-let, December 2004
- Men endorse the ‘property as retirement provision’ argument
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- Figure 49: Three main positive statements regarding BTL, by gender, age and socio-economic group, December 2004
- A future BTL boom in South West/Wales?
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- Figure 50: Three main positive statements regarding BTL, by region, December 2004
- A third of broadsheet readers would consider letting their property
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- Figure 51: Three main positive statements regarding BTL, by new technology users, newspaper readership, commercial TV viewing and supermarket usage, December 2004
- Women concerned about strangers in their property
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- Figure 52: Four main negative statements regarding BTL, by gender, age and socio-economic group, December 2004
- Londoners are worried about a house price crash
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- Figure 53: Four main negative statements regarding BTL, by region, December 2004
- Sainsbury’s/Waitrose shoppers fear a house price crash
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- Figure 54: Four main negative statements regarding BTL, by new technology users, newspaper readership, commercial TV viewing and supermarket usage, December 2004
- Three quarters of owners of a second home endorse property as part of retirement planning
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- Figure 55: Specific attitudinal statements regarding buy-to-let, by target groups, December 2004
- Potential BTL investors happy to receive help
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- Figure 56: Attitudinal statements regarding funding and management of buy-to-let properties, December 2004
- Key age range appreciate advantages of letting agency
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- Figure 57: Attitudinal statements regarding funding and management of buy-to-let properties, by gender, age and socio-economic group, December 2004
- A broad range of consumers would seek specialist advice
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- Figure 58: Attitudinal statements regarding funding and management of buy-to-let properties, by newspaper readership, new technology users, commercial TV viewing and supermarket usage, December 2004
- Cluster groups outline viable targets for BTL business
- Cluster 1 – Sound Investments (13% of sample)
- Cluster 2 – Opportunists (11% of sample)
- Cluster 3 – Anti Buy-to-Let (62% of sample)
- Cluster 4 – Financial Risk Fears (6% of sample)
- Cluster 5 – Tenant Traumas (8% of sample)
- Youngsters and the middle-aged believe BTL is a sound investment
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- Figure 59: Five typology groups regarding BTL, by gender, age and socio-economic group, December 2004
- Opportunists can be reached via broadsheet newspapers
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- Figure 60: Five typology groups regarding BTL, by new technology users, newspaper readership, commercial TV viewing and supermarket usage, December 2004
- Repertoire of positive statements
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- Figure 61: Repertoire of the number of positive statements about BTL, by gender, age and socio-economic group, December 2004
Industry Views
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- An exodus from BTL?
- Major developments in this sector
- Future prospects
The Future
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- Demand for rental property will be sustained...
- ...but the huge imponderable is the state of the housing market
- BTL lending in the second half of 2004 indicates slower future growth
- Business may be stimulated by softer lending criteria
- ARLA survey suggests landlords are taking a cautious approach
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- Figure 62: Current activity of landlords in terms of increasing/decreasing their net investment in residential property, by region, November 2004
- Student BTL market will provide impetus
Forecast
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- Market growth will slow down
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- Figure 63: Forecast for buy-to-let gross new advances, by value, 2004-09
- Volume sales will decline
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- Figure 64: Forecast for buy-to-let gross new advances, by volume, 2004-09
- The buying sector
- The renting sector
- Factors used in the forecast
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