REVIEW
MARKET
Helping landlords succeed in today’s buy-to-let market Jason Berry group sales & marketing director, Crystal Specialist Finance
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gainst the backdrop of the cost-of-living crisis and soaring house prices, increasing numbers of first-time buyers, and even first-time landlords, are being frozen out of the market because of the knock-on pressures on affordability. With the property investment landscape undergoing so much change, the market is becoming a tougher place for many; for example, a recent article in The Times suggested that 86 per cent of tenants do not feel they will ever save more than a five per cent deposit. In addition, the end of the stamp duty holiday has meant first-time buyers of a home worth £400,000 are being smacked with bills of £5,000. Consequently, the prospects for many buyers are tougher than ever. However, despite the increased pressures on many potential borrowers, the market is witnessing the development of a new playing field. For those well-poised to capitalise on the available opportunities, portfolio buyto-let investors are increasingly finding themselves towering over their rivals. Recent government figures revealed that buy-to-let investors and second home buyers now pay almost half of the entire Stamp Duty revenue going to HM Revenue & Customs each year. THE BUY-TO-LET BOOM
This trend has been exacerbated by two factors caused by the pandemic. Firstly, there is the phenomenon of bolt holes that were previously considered remote now being snapped up by investors capitalising on the UK staycation craze. And now, as we have seemingly come
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out on the other side of COVID-19, a supply-and-demand dynamic is playing out between the lack of rental properties on one side, and the sky-high tenant demand created by buyers’ stalling mobility on the other. This complex power play has not gone unnoticed, with coastal resorts such as Whitby and Brighton introducing caps on second home ownership to prioritise local first-home ownership. The increased popularity of buy-tolet investment has certainly not gone unnoticed within Crystal Specialist Finance either; in fact, we have seen a 28 per cent increase in buy-to-let business when comparing H1 2021 to H1 2022. In addition, buy-to-let deals represent 33 per cent of our completed business for the year so far, and we expect continued growth in that market. WHAT ABOUT FIRST-TIME LANDLORDS?
Property prices, as they so often do, are still outstripping inflation. Even when coupled with the financial burden of meeting regulatory requirements, bricks-and-mortar are king when one is looking for an excellent income opportunity. This is why we’re seeing such fertile breeding grounds for the professional portfolio landlord at the moment – but it doesn’t mean all landlords are created equal. First-time landlords are just as likely to be adversely affected by the cost-ofliving crisis, not to mention the legal requirements they have to meet. From gas and electrical safety certificates to insulation and smoke alarms that have a carbon monoxide detector, landlords have an ever-increasing number of legal requirements to adhere to. That’s not to mention the passing of the Rental Reform White Paper and predicted changes to EPC regulations.
Needless to say, all these factors have an impact on affordability. REMOVAL OF STRESS TESTS
Borrowing could become easier for many as the Bank of England plans to remove the three per cent mortgage stress test in August and the market has generally welcomed the central bank’s move. However, for buy-to-let investors and landlords, the stress tests are different than for others. Lenders generally stress-test applications against mortgage rates of five per cent or 5.5 per cent, in order to ensure landlords can afford repayments; this is despite the fact that typical rates have been much lower than this for a number of years. As well as these mortgage stress tests, buy-to-let lenders also normally require a buffer of 125 per cent; this means that rental income must come to at least 125 per cent of mortgage payments each month. GETTING HELP FROM A SPECIALIST
Due to these requirements, many prospective landlords are falling through the cracks, leaving brokers and their clients wondering where to turn. This is where partnering with a specialist can give a boost to an individual’s buy-to-let ambitions – even if they have adverse factors affecting the case. A specialist will scan the entire market for you, helping you to navigate obstacles, and can even provide you with access to exclusive or semiexclusive buy-to-let products with the UK’s best specialist lenders. Not only that, specialists can guide brokers, alleviate the administrative burden, and also work as a driving force for a case’s completion. With the current myriad pressures on brokers, an extra pair of hands can be a gamechanger. www.sfintroducer.com
