"Providing buy-to-let mortgages for flats has traditionally been the bulk of our business followed by terraced housing but this year there has been a shift."
The pandemic has changed the lives of everyone with many people reassessing their life, their way of living and where they reside.
We have seen this with the large number of housing transactions buoyed on by the stamp duty holiday, people wanting larger homes and moving away from cities and the commuter belt.
So it has been interesting to see how Landbay’s mortgage portfolio has changed since the pandemic and how landlords' buying strategies have altered.
Providing buy-to-let mortgages for flats has traditionally been the bulk of our business followed by terraced housing but this year there has been a shift.
In February, there was a noticeable change around with mortgages for terraces outnumbering flats. From February to August this year our mortgage book for new loans averaged 36% for flats and 41% for terraced housing, including end of terrace.
Compare that to the same period last year and flats accounted for 47% of our buy-to-let 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 and the patterns here have remained fairly consistent.
So what has changed in 2021 to find landlords favouring the terraced house?
There are more terraces in the UK than any other property type and they range from small back-to-back homes to large Victorian and Edwardian rows of houses. Terraces make up around 27% of UK housing stock, followed by semi-detached houses at 25%, flats at 21%, detached houses at 18% and bungalows at 9%.
Flats have always been popular with landlords as they are often cheaper to buy than houses and easier to maintain, while terraces are usually less expensive than semi-detached and detached homes.
Properties with two bedrooms are the most popular across our mortgage portfolio although it does depend on the type of housing. Most investors buy flats with two bedrooms with the next preferred option being one bedroom apartments.
Landlords buying terraced houses tend to go for three bedrooms, while two bedrooms is the next most popular. Interestingly, we have seen a pick-up in landlords buying four bed terraced housing, and this started in October 2020. Part of this is HMO but in addition, the pandemic has highlighted what has become known as the ‘race for space’. People want a spare room to use as a home office – and that is the case for those who rent property as well as owning it.
These changes are just what we have been noticing in our business but it does show a shift in what clients are doing with their investments. We lend to many portfolio landlords who are diversifying and buying different types of property in different locations. By doing this they are spreading their risk and obtaining a variety of yields.
The pandemic has changed so many things, including it would seem property investment, and is a reflection of housing demand today.