Table of Contents
Issues in the Market
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- Key issues
- Market definitions
- Abbreviations
Future Opportunities
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- Being unexciting
- You must also get the message and customer service right
- But boring does not mean doing nothing
- Renting a lifestyle option?
- The long-term prospects look good
- Think of the cross-sell opportunities
Market in Brief
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- The market shifts down sharply
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- Figure 1: Number and value of buy-to-let sales, 1999-2008
- Supply beginning to exceed demand for rental properties
- Reluctant landlords are the most vulnerable in the short term
- The risk profile to worsen
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- Figure 2: The percentage of BTL mortgages in arrears of three months or more, 1999-2008
- Landlords make informed judgements
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- Figure 3: Property investor typologies – landlords v non-landlords, January 2009
- A good opportunity to pick up a bargain
- Lenders retrench and innovation dries up
- Lloyds Banking Group the new market leader
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- Figure 4: Market share of the leading buy-to-let providers, by amounts outstanding, mid-2008
- Heavy reliance on intermediaries
- Buy-to-let advertising activity follows the market down
- Improvement needed in advertising
- Attitudes towards property investment remain largely positive
- Key targets for the BTL market
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- Figure 5: The BTL consumer typologies and their attitudes towards a BTL investment, January 2009
Broader Market Environment
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- Key points
- Looks like trouble ahead
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- Figure 6: The quarter-on-quarter growth of real GDP, Q1 2003-Q4 2008
- Unemployment: Every cloud has a silver lining
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- Figure 7: The level of unemployment in the UK (All: Aged 16+) seasonally adjusted, 2006-08
- Will renting help limit the rise in unemployment?
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- Figure 8: Household characteristics in England: Recently moved households, by current and previous tenure, 2006/07
- Severe pressure on mortgage lenders
- Mortgage rates coming down…
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- Figure 9: UK Inter-bank, three-month rate+ and selected UK bank rates*, January 2001-December 2008
- …as banks respond by narrowing their margins, whilst…
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- Figure 10: How BTL lending spreads changed+, Q2 2007-Q1 2009
- …mortgage lenders don’t know which way to turn
- Demographic trends should boost rental sector
- A strong rise in demand for rented flats
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- Figure 11: The breakdown of households in England, by tenure and household type, 2007
- Greater social segmentation
- More local hotspots
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- Figure 12: The 20 areas of England predicted to see the fastest growth in household numbers, 2001-11
- Hotspots around universities
- Implications and opportunities
- Migration trends: is the tide turning?
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- Figure 13: Approved applicants for the Worker Registration Scheme+, Q1 2005-Q3 2008
- Space in the rented sector
- Technologically – Improving the flow of information
Internal Market Environment
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- Key points
- Has the love affair with home ownership ended?
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- Figure 14: Tenure structure of dwellings (index of number of dwellings, 1991=100), 1991-2007
- Private renting no longer the Cinderella tenure
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- Figure 15: Total number of UK private rented dwellings (million) and the share of all dwellings accounted for by private rentals (%), 1981-2007
- But is the BTL bubble beginning to deflate?
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- Figure 16: Share of private rental dwelling being purchased with BTL mortgages, 1998-2008+
- House prices – capital gains are disappearing…
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- Figure 17: Index of average mix-adjusted UK house prices (fed 2002=100), February 2002-November 2008
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- Figure 18: The average value of rented houses and flats – all regions (£000), 2007 and 2008
- …and set to go on shrinking?
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- Figure 19: The percentage annual change+ in the index of average mix-adjusted UK house prices, January 2006-March 2008
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- Figure 20: The annual+ percentage change in the average value of rented houses and flats – all regions (£000), February-November 2008
- Regions outside the South East gain the most
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- Figure 21: Index of house prices, by region, November 2008 (February 2002 = 100)
- All regions suffer but London and the South East the most
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- Figure 22: The average value of rented houses (£000), by region, 2007 and 2008
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- Figure 23: The average value of rented flats (£000), by region, 2007 and 2008
- Rental demand strengthens but rental returns dip…
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- Figure 24: Rental returns (% yield) to landlords, Q3 2003-Q4 2008
- …but lower interest rates boost geared returns
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- Figure 25: The annual rate of return on BTL (geared investment and cash purchase), Q1 2006-Q4 2008
- The risk profile of BTL worsens sharply
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- Figure 26: Buy-to-let mortgage arrears, maximum LTV and minimum rental cover, 1999-2008
- Fraud also an issue
- Implications and opportunities
- Profile of residential investment landlords: who are they
- The average landlord is almost 50
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- Figure 27: Key landlord demographics, average of three quarterly surveys, March 2008, August 2008 and October 2008
- Increasing regulation is a cause for concern for landlords
- Tenancy Deposit Scheme
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- Figure 28: Tenancy deposit schemes joined by landlords, September 2008
- Plan for enforced self-regulation
- The Carsberg Report
- Law Commission Report
Competitive Context
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- Key points
- Buy-to-let property competes in the asset market
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- Figure 29: Sources of passive income, 2006/07
- Greater competition in the property investment market
- Nowhere to turn?
- BTL still generates good income returns compared to competitors…
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- Figure 30: Rental yield on houses compared with the return on bank deposits and the dividend yield on stocks and shares, Q3 2006-Q3 2008
- …and proved more resilient than the stock market for capital appreciation
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- Figure 31: Capital return on property and equity, Q3 2003-Q3 2008
Strengths and Weaknesses
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- Figure 32: Buy-to-let mortgage market – strengths and weaknesses, 2009
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Who’s Innovating?
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- Key points
- A market living on its past reputation?
- Key innovations in the past few years go into reverse
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- Figure 33: Changes in market conditions, 2006-08
- Figure 34: The Number of BTL mortgages available, August 2007-January 2009
- Low-rate/fixed-rate deals available, but watch those fees
Trade Perspective
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- About the participating organisations
- Late 2009 and 2010 will see the crunch over
- The crunch will not have a lasting impact on the market
- Accidental or reluctant landlords will only have a temporary impact
- Portfolio acquisition possible, an interesting idea but only on the right terms
- Some NPD on the horizon
Market Size and Forecast
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- Key points
- Demand for BTL finance falls
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- Figure 35: How demand for BTL changed+, Q2 2007-Q1 2009
- Landlords bunker down in the storm
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- Figure 36: How landlords are acting over their net investment in residential property (% of landlords), Q4 2004-Q4 2008
- Amounts outstanding continue to grow…
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- Figure 37: Number and value of buy-to-let mortgages outstanding, 1999-2008 (year-end)
- …but new business levels are well down
- Implications and opportunities
- Remortgaging drives the market in 2008
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- Figure 38: The breakdown (%) of buy-to-let gross advances (value), by type of mortgage, 2002-08
- Forecast
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- Figure 39: Forecast of the value and volume of new buy-to-let sales, 2003-13
- Factors used in the forecast
Market Share
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- Key points
- A market in transition
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- Figure 40: Ten largest buy-to-let lenders, by the number of products on the market, January 2009
- A new market leader
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- Figure 41: Market share of the leading buy-to-let lender groups, by amounts outstanding, mid-2007 and mid-2008
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- Figure 42: Market share of the leading buy-to-let providers, by amounts outstanding, mid-2008
Companies and Products
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- Key points
- Major reduction in capacity
- Fixed deals the norm
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- Figure 43: Structure of BTL mortgages, January 2009
- APR related to period
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- Figure 44: The APR charged on BTL mortgages, January 2009
- Arrangement fees vary significantly
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- Figure 45: Quoted arrangement fees on a £120,000 BTL mortgage, by type of mortgage, January 2009
- Arrangement fee related to period mortgage runs
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- Figure 46: Quoted arrangement fees on a £120,000 BTL mortgage, by period of mortgage, January 2009
- Fees and maximum LTVs on the up
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- Figure 47: Trends on arrangement fees and maximum LTVs in secured lending, Q2 2007-Q1 2009
- Figure 48: The percentage of mortgage products on the market, by LTV (%), January 2008 and January 2009
- Little product differentiation
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- Figure 49: The three main types of BTL mortgages available, January 2009
- Mini profiles of the largest buy-to-let lenders
- The Lloyds Banking Group
- Bradford & Bingley (Mortgage Express)
- Paragon Mortgages
- The Mortgage Works (Nationwide Specialist Lending)
- Bank of Ireland
- Northern Rock
- Capital Home Loans
Brand Communication and Promotion
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- Key points
- Mortgage adspend follows the market down
- Buy-to-let rollercoaster
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- Figure 50: Buy-to-let mortgage adspend (£000) and share of the mortgage adspend taken by buy-to-let, year to November 2004-08
- Buy-to-let providers focus their adspend on the press
- Implications and opportunities
- C&G the heaviest investor
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- Figure 51: The 25 largest investors in buy-to-let mortgage advertising, by advertiser, year to November 2004-08
Channels to Market
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- Key points
- The intermediary the prime channel to market
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- Figure 52: Distribution channels used by leading buy-to-let lenders, 2009
The Consumer – Property Ownership and Aspirations
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- Key points
- Survey background
- Being a landlord is a niche activity
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- Figure 53: Property ownership and intentions to buy, January 2009
- Big rise in rental supply
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- Figure 54: The number of landlords, 2006-09
- Implications and opportunities
- Landlords tend to be affluent family adults
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- Figure 55: The ownership and intention to own a UK rental property by socio-economic group, lifestage, household income and ACORN group, January 2009
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- Figure 56: The ownership of a UK rental property, by Mintel’s Special Group, January 2009
- It’s a middle-aged thing
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- Figure 57: The ownership of a UK rental property, by age and age by socio-economic group, January 2009
- But like policemen, are landlords getting younger?
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- Figure 58: The ownership of a UK rental property and intention to buy, by age and age by socio-economic group, January 2009
- Implications and opportunities
- Digital media and broadsheets hit the mark
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- Figure 59: The ownership of a UK rental property and intention to buy, by technology usage, internet frequency, web use and newspaper readership, January 2009
- Implications and opportunities
The Consumer – Impact of the Crunch
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- Key points
- House prices expected to continue to fall
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- Figure 60: Attitudes towards property prices in the next couple of years, January 2009
- Landlords more pessimistic than other adults
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- Figure 61: Attitudes towards property prices in the next couple of years – landlords v non-landlords, January 2009
- Affluent adults more pessimistic
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- Figure 62: Attitudes towards property prices: average score, by gender, age, socio-economic group, household income and ACORN group, January 2009
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- Figure 63: Attitudes towards property prices: average score+, by Mintel’s Special Group and age by socio-economic group, January 2009
- But landlords still see property as a good investment
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- Figure 64: Attitudes towards property Investment – landlords v non-landlords, January 2009
- Implications and opportunities
- But raising finance could be an issue
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- Figure 65: Attitudes towards mortgage finance – landlords v non-landlords, January 2009
- Mortgage lenders need to rebuild bridges
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- Figure 66: Attitudes towards mortgage lenders – landlords v non-landlords, January 2009
- Implications and opportunities
- Property investor typologies
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- Figure 67: Consumer property typologies, January 2009
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- Figure 68: Consumer views on property investment, by property typologies, January 2009
- Landlords are Calculators
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- Figure 69: Property investor typologies – landlords v non-landlords, January 2009
The Consumer – Consumer Targets
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- Key points
- Four in ten landlords thinking about profiting from falling prices
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- Figure 70: Consumer atttudes to a BTL investment – landlords v non-landlords, January 2009
- Mature adults the least interested in BTL
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- Figure 71: Adults unlikely to invest in BTL properties, by gender, age, socio-economic group and ACORN group, January 2009
- BTL investor typologies
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- Figure 72: The seven BTL investment clusters, January 2009
- Active investor and experts the key target groups
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- Figure 73: Details of the seven BTL investment clusters, January 2009
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- Figure 74: Attitudes towards BTL investment, by the main BTL investment clusters, January 2009
- Landlords are Raring to go
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- Figure 75: BTL investment clusters – landlords v non-landlords, January 2009
- Implications and opportunities
- Being Anti-BTL does not mean being anti-property
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- Figure 76: Attitudes towards property investment, by the main BTL investment clusters, January 2009
- The affluent are Raring to go…
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- Figure 77: The main BTL investment clusters, by socio-economic group, ACORN group and household income, January 2009
- …the mid-income want to wait
- Implications and opportunities
- Dreamers may lack the confidence to realise their dreams
- Anti-BTLs lack the income
- 25-54-year-old couples want to get going
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- Figure 78: The main BTL investment clusters, by gender, age, lifestage and marital status, January 2009
- The young singles can only dream
- Oldest adults are not interested
- South Easterners want to act, while Northerners can only dream
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- Figure 79: The main BTL investment clusters, by TV region, January 2009
- Digital media and the broadsheets are powerful marketing channels
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- Figure 80: The main BTL investment clusters, by technology used and newspaper readership, January 2009
- Intermediaries are key
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- Figure 81: The main sources of finance advice, by BTL investment clusters, January 2009
- Implications and opportunities
- Word of mouth and viral marketing work
- Saying no with a smile on your face
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