The key findings of Datamonitor’s report, entitled ‘Buy-to-let Mortgages and the Rental Sector’, are:
• Investor confidence will be bolstered by the stabilisation of house prices
• Demand for rental property amongst tenants is rising faster than supply
• Rents are starting to stabilise
• Since the start of 2009, a greater proportion of landlords have bought rather than sold property
• Just two lenders currently account for 80% of buy-to-let lending
• Arrears and possessions have been no higher in the buy-to-let sector than in the market as a whole
• Supply of mortgage finance will be unable to satisfy investor demand
The report forecasts that gross advances will remain flat this year, rising to £15.8 billion in 2012, £20.2 billion in 2013 and £25.6 billion in 2014. Council of Mortgage Lenders figures show that buy-to-let gross advances totalled £8.5 billion in 2009.
Commenting on the report, Nigel Terrington, chief executive of The Paragon Group, said: “Buy-to-let lending hit its lowest level since 2001 last year and the market is dominated by just two lenders. Investor demand has never been the issue, it has always been mortgage finance supply, which has been severely restricted since the closure of the wholesale funding markets.
“There are a number of socio-economic and demographic factors that will drive demand for rented property in the future, such as inward migration, the rate of new household formation and the composition of those households, growing student numbers and a greater propensity to rent amongst young people. The private rented sector needs to expand to cater for these growing markets, yet it is being inhibited by the lack of available finance.”
