Buy-to-let: A year of changes

In 1996 the Association of Residential Letting Agents (ARLA) worked with a small group of lenders to develop and launch a mortgage product specifically tailored for landlords and so, 25 years ago the first buy-to-let mortgage was born.

Related topics:  Mortgages,  Special Features
Barry Searle | Castle Trust Bank
1st December 2021
Barry Searle Castle Trust
"Buy-to-let reached its 25th birthday in 2021 and many investors are now more confident in taking on more work in return for greater returns."

I’ve been involved with the specialist property lending market for more years than I care to remember, and I can safely say that over the last quarter of a century, few years have seen quite as much change in the buy-to-let market as 2021.

As the UK slowly emerged from lockdown in the first half of the year, it was clear that the impact of lockdown had changed many people’s attitudes to where they want to live. Data from property website, Rightmove, shows that increased demand from renters to live further away from cities has led to asking rents in suburban and rural areas jumping by 11% since before the pandemic started. This is compared to asking rents increasing by just 2% in urban areas.

Rightmove says that demand for each available property is up 155% compared with pre-pandemic levels in suburban areas, and up 224% in rural locations. Demand from renters looking in urban locations is also rising, but by not as much at 82%. However, there are more homes for them to choose from. Of all the available rental properties on Rightmove, 64% of them are now in urban locations, which is up from 48% pre-pandemic. The proportion of available properties that are in the suburbs has dropped from 46% to 33%, while rural areas have declined from 6% to 3%.

While most of the increase in rental demand has been in rural and suburban areas, the UK Rental Market Report by Zoopla for Q3 2021 found that London rental growth swung back into positive territory after 16 months of falls. And Zoopla says that rental demand will remain higher than supply as the availability of properties to let is 43% below the five-year average.

This increasing imbalance between supply and demand of rental property has encouraged investors in greater numbers to refurbish properties and introduce new higher standard properties into the rental stock. Property refurbishment has always been a popular method for investors to achieve greater returns – increasing the capital and rental value of a property by carrying out renovations and 2021 has seen the emergence of product innovations that have encouraged more investors to take the plunge.

Traditionally a refurbishment project is funding by a bridging loan and then an investor has an option to sell the property or refinance onto a term product. However, in an uncertain environment, both of these exit routes present uncertainty and potential extra costs to investors. So, this year, lenders have addressed this uncertainty by providing short term loans for property refurbishment combined with an assured exit. One example is our Bridge to Let product at Castle Trust Bank, which has proven to be very popular throughout the year.

2021 was, of course, the year of the staycation. This trend presented opportunity for property investors and the popularity of holiday lets surged. In fact, in September, Primis Mortgage Network says that holiday let mortgages were the most common broker query during the month. Travel is likely to open up in the future, but the popularity of holiday lets looks set to stay. In fact – perhaps reflecting awareness raised in the recent COP26 summit – Sykes Holiday Cottages says that one in five people are more likely to consider a staycation because of concerns for the environment.

Holiday lets are one way for investors to achieve better yields, but the two highest yielding types of property investment this year, according to research by BVA BDRC, are HMOs and multi-unit blocks and both of these have also performed strongly over the past 12 months with demand from both tenants and new investors entering the market. As with property refurbishment, many of these investors have benefitted from product innovations, such as Bridge to Let, that have enabled them to maximise opportunities with the safety net of a guaranteed exit from their initial short-term finance.

This growing demand for more complex types of buy-to-let investment reflects the maturing market. Buy-to-let reached its 25th birthday in 2021 and many investors are now more confident in taking on more work in return for greater returns. Lenders have responded to this trend and the range of options for specialist buy-to-let has never been as large. We can look back on 2021 as a year when a lot was achieved despite the challenging circumstances. And we can look forward to 2022 with optimism.


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