Market movers

Since the late 1990s, the residential investment market has been almost entirely associated with the buy-to-let investor. Rightly or wrongly, the ills of the UK housing market – most notably the difficulties faced by first-time buyers – have been laid at their door.

The summer budget of 2015 marked the point at which politicians sought to discourage buy-to-let investment through tax policy. And the squeeze continues as mortgage regulation spreads across both small-scale and portfolio landlords. Interest rate rises and progressive cuts in tax relief will limit investor opportunity.

According to UK Finance, the number of buy-to-let mortgages granted for purchasing a property was 75,300 in the year to the end of August 2017 – ˆ47% lower than in the year to March 2016. The growth in the number of outstanding buy-to-let mortgages is lower still, at just 24,800, and there is evidence that some investors are shedding stock as shown in the graph below.

FIGURE 2

Feeling the pinch Low growth in the number of outstanding BTL mortgages suggests stock is being sold

 

Source: Savills Research, UK Finance

Irrespective of the support provided by the Bank of Mum and Dad and Help to Buy, little has changed for the deposit-constrained first-time buyer and the demand for rental stock will continue to grow.

Cash investors, however, remain far more active. The quarterly stamp duty land tax statistics suggest that in the year to September 2017, the additional 3% surcharge was paid on 245,000 purchases.

While some of these will be second home purchases, people buying for other family members or people buying their new home before selling their old one, the majority will have been investment buys.

Looking to 2018 and beyond, the decline of the mortgaged buy-to-let investor will open things up for the growing multifamily or build to rent market, led by the likes of Sigma and institutions such as L&G, M&G, and LaSalle, who have contributed to the delivery of more than 17,000 units so far.

At the end of the third quarter of 2017, our joint research with the British Property Federation showed that there were almost 79,000 such units in the development pipeline, a number that has increased by 40% in just six months. Of these, some 24,000 are under construction in a rapidly evolving sector that has embraced offsite construction and is rapidly changing the nature and range of rental options available to tenants. All of the evidence suggests this will gather pace through 2018.

Link