Property investment is changing.
As the pace of legislative change picks up, some one-off landlords are concluding that the time or money required to stay on top of things isn’t worth it for them. But for the emerging breed of professional landlord, this is a time of adaptation and expansion. The figures show that the bigger the portfolio, the more ambitious the growth plans of its owner.
The good news for the sector and tenants alike is that the emerging landlord is professional, informed, involved, risk-savvy and investing for the long term.
They are also younger, and investing differently, with growth areas including holiday-lets, flats and HMOs.
Understanding the new market and the emerging landlords will be key in developing the financial products and services they need to make a success of their businesses.
There is undoubtedly a marked shift in the landlord population. This is no longer something for anybody to do on the side after a quick credit check - it’s coming to be the preserve of committed, long-term investors with experience and expertise - or the willingness to gain it. At the end of the day, it’s the professionals who are going to win buy-to-let. Not only is the market a very different place to the one we knew 20 or even 10 years ago, the truth is there are actually 300 very different local markets up and down the country. The cookie-cutter investor will no longer cut the mustard - because there is no one size fits all solution. If you know your market, if you change with it, you can still come out on top. Having said that, I think there really is a limit to how much more the sector can take in terms of change and interference before we start to see significant problems. At this time the very last thing we need is a reduction in rental supply - that’s going to put rents up for tenants, put pressure on local authorities, and leave the most vulnerable in pretty dire straights. The fact is, the UK needs a strong and stable private rented sector. Punishing the PRS is not solving the housing crisis - it’s not making housing more abundant, it’s not making housing more affordable. I think by working WITH the new and emerging breed of private landlord, the government will achieve more, more quickly, for more people - and therefore more voters.
For me, this ends up being about maths. And the bare facts are that your money - or other people’s you use to invest - will still get better returns in property than in a bank, with only marginally more risk if you know what you’re doing. Getting that education is absolutely vital, and so is coming at this from the perspective of an investor rather than a landlord. You don’t need to own property to make money from it - sourcing, joint ventures, rent to rent, leasing - these are all avenues we’re seeing more and more investors start to explore. All of that is part of the changing market - and part and parcel of this picture of the new, emerging landlord.
The phoenix landlord rising from the ashes of a beleaguered private rental sector is younger, bigger, with an appetite to grow and diversify their strategy. They are well informed, up to date on the latest legislation, unafraid of NEW legislation, savvy about insurance, and see themselves as a business. In fact many are modelling themselves AS a business, with lenders suggesting 7 in 10 new buy-to-let applications are being made by limited companies. It’s one way around Section 24, and clearly an example of how landlords are adapting. Our job as insurers now is to make sure we develop the products the landlord of the future is going to need in order to continue to invest and thrive in what is very much a new market, while mitigating all of its new risks.