Fewer Brokers Think Investors Should Expand BTL Portfolios

• Number of brokers who are unsure of the market doubles
• But landlord demand drives growth – 98% of brokers writing BTL business say they are writing more of it than they were at the start of the year

Fewer brokers think this is a good time for landlords to expand their portfolios than at the beginning of the year, according to research commissioned by West One Loans, the privately funded bridging lender.

In February 2012, when West One Loans last surveyed brokers on their confidence in the buy-to-let market, 83% said they thought it was a good time for investors to expand their buy-to-let portfolios. Six months later, that number has fallen to 81%. At the same time, the number of brokers who are unsure of the market has doubled, from 5% in February, to 10% in August.

Duncan Kreeger, chairman of West One Loans said, “While there has been a fall in the number of brokers who are certain investors should expand their portfolios, the change is small – and 81% of brokers are still confident it’s a good time to invest in the sector.  Furthermore, the number of brokers who think it’s definitely not a good time to pile into the market has fallen to less than one in ten. Landlords and brokers have different opinions of the market. While fewer brokers think it is a good time to invest in buy-to-let, high demand from landlords suggests they feel otherwise.”

As part of the research, West One Loans specifically polled brokers who were already offering buy-to-let bridging products, to see if they were writing more or less buy-to-let bridging business than they were six months ago.

In February 2012, 73% of brokers offering buy-to-let bridging products said they were doing more business than they were six months before.  This has now risen to 98%.

Duncan Kreeger said, “Despite a slight cooling of broker sentiment towards buy-to-let as an investment for future, thanks to the current demand from landlords, buy-to-let bridging is flourishing.  Back in February, 70% of brokers offering buy-let products said they were writing more buy-to-let business than they were six months before.  That number’s now risen significantly.  Bridging is still not being affected by increasingly problematic conditions in the wider residential market.  In fact, it’s thriving off the back of them.”

Buy-to-let business seems to be growing at a sustainable rate.  Three out of every five brokers say growth is ‘Moderate’ or ‘Fast’ (61%), compared to just two out of every five (40.2%) back in February.

The growth in BTL business is reflected in brokers’ customer profiles.  38% of brokers’ bridging customers are now landlords, compared 37% six months ago.  The increase has been driven by demand from professional, rather than amateur landlords, with professional landlords now representing 25.4% of brokers’ bridging customers, compared to 23.3% in February.

Duncan Kreeger said, “I am pleased to say that the growth in buy-to-let business seems to be steady, rather than explosive at the moment.  We aren’t seeing a massive increase in the number of brokers saying buy-to-let is booming – this is a moderate, sustained rate of growth.  The long-term macro-economic picture appears to back that up.  Given the current housing shortage, buy-to-let should represent a sound investment for the future.  But professional landlords are finding it difficult to get access to finance from high street lenders.  Even when they can – it’s painfully slow.  Over the last six months, they have woken up to the fact that bridging loans provide a rapid solution to their problem.  And as property investors embrace bridging, brokers are seeing the benefits.”

Aside from buy-to-let, bridging for all purposes is expanding, with more than seven out of every ten of brokers reporting an increase in the amount of bridging business they are conducting, compared to the year before.  In February, six out of every ten bridgers said they were writing more business than they were a year ago.

Overseas students bolster returns for UK investors says Assetz

Domestic university applications have dipped this year but international students are plugging the gap and boosting yields for investors in student halls of residence, reports buy to let specialist Assetz. Investors in the sector are benefiting from gross yields of 8-10% (approximately 6.5% net), almost twice the average yields in the wider buy to let market.

The number of university applications from domestic students fell by 8.7% this year according to UCAS, following the increase in high tuition fees to up to £9,000 and worsening job prospects for new graduates. However, university courses are still heavily oversubscribed and applications from international students in particular to study at UK universities are on the rise, with the British Council forecasting an additional 30,000 international students enrolling on UK university courses by 2020, a 10% rise this decade.

The NUS has reported a severe national shortage of dedicated student accommodation, creating strong competition for high quality purpose built student residences and resulting in extremely low void periods for investors, who typically know seven months in advance that their property is tenanted for the next academic year.

International students are less price-conscious and more likely to remain in dedicated student halls throughout the duration of their course than their UK counterparts. This presents an opportunity for UK investors seeking a high yielding, low risk, hands off investment, with private halls being managed by on site management teams who handle all bills and ground rent.

Stuart Law, Chief Executive of Assetz, said:

“The student property sector has proved to be one of the most resilient investment sectors during the downturn, with rental incomes and property values remaining stable or increasing.

“International students are used to paying for their education and despite steep rises in tuition fees, the UK remains highly competitive compared to other popular destinations such as the United States. The dip in demand from domestic students has been far from catastrophic and the rise in international students enrolling at UK establishments will not only fill the gap but increase competition for places.”

Dundee case study

Purpose built student accommodation is for sale in Dundee city centre, less than a five minute walk from the University of Dundee. This is a high income generating, hands off investment, fully managed by an on site management company. Four bedroom apartments cost from £196,500, with five bedroom apartments starting from £241,500. The gross rental yield being achieved is 9.2%, generating an annual income of up to £22,253.

Contact Assetz on 0845 400 9000 www.assetz.co.uk