A ‘soft’ buy-to-let market still presents opportunities for advisers

Comprised of data collected from surveyors who, we might say, are at the ‘coalface’ when it comes to working in our market, the research paints a less than sparkling picture around sales and pricing across the country.

Clearly, it’s very difficult to talk about the UK market as a single entity when regional differences can be so great, but given that it’s been described as ‘the weakest reading since September 2012’ you can anticipate that, while not universal, many regions are showing both a slowdown in transactions and falling prices. In areas such as London, the South East, South West and East Anglia, RICS anticipates these will continue to fall over the next three months, and that the UK market as a whole will remain ‘flat’ for the next 12 months.

The main cause is, perhaps unsurprisingly, put down to nervousness around how ‘Brexit’ might land, what it might mean for the UK economy, and ultimately this was always going to impact on individuals’ decisions about what is likely to be the biggest purchase of their lives. Suggesting that the market is in something of a ‘limbo’ until greater certainty is delivered in this area, RICS (like many of us in the market) is looking for much greater political clarity and confidence over the next few months in order that we might begin to plan and prepare.

Having said all of that, a ‘soft’ housing market still presents opportunities for both advisers and their clients, particularly those in the buy-to-let/investment space who have perhaps been waiting and biding their time in order to add to their portfolios. Despite UK Finance suggesting recently that buy-to-let purchase lending would not hit its £12bn prediction for 2018, we at The Mansfield believe that this is not an indicator of further future decline.

If, as an adviser, you’re looking for a reason to target landlords, then look no further than some of the rental statistics which have been published lately. Reapit – which manages software for letting and estate agents – said that rental demand was up by 13.3% in the last year, while rental housing supply was down 6.9%. This is resulting in rents inching up and, when you also consider a long-term view of the capital gains potential, you might see why both existing (and new) landlords are seriously considering their purchase options.

For us, as a lender, it’s important we offer product and lending options for advisers and their landlord clients who feel now is the right time to buy, and that they can make the most of a softer market. For instance, we are able to support those professional landlords who want to capital raise on mortgage-free properties in order to perhaps fund the deposit on another purchase; or we can offer a light refurbishment product to improve the property standard for letting; and, of course, in looking at the loan amount available we’re able to take into account personal income alongside rental income. A flexible and pragmatic approach can certainly help existing landlords to get to where they need to be on the mortgage required, and can help them get that rental stock into the market where there is clearly a growing demand.

Landlords are now getting to grips with the changes to the buy-to-let sector and are acutely aware of what they need to do in order to ensure ongoing profitability, especially in light of the tax relief changes and the increase in stamp duty, for example. With an advisers’ help, they are able to factor that in and take stock of the current market opportunity in order to add to portfolios and make the most of the ongoing demand. Professional landlords are a resilient bunch and there remains a desire to expand – dig below the surface and market conditions might be more favourable than the tax changes may lead you to believe. Advisers are well-placed to support these landlords and deal with those lenders who can help make their purchase a reality.