The next generation of BTL – Sedgwick

In 2014, just 15% of BTL mortgaged properties were purchased by those aged 18-34. A decade later, that figure has risen to 22%, and the average age of a BTL purchaser has dropped from 46 to 43. 

While not the most striking numbers, it suggests a positive direction of travel and is supported anecdotally, with our head of surveying telling me that his team has reported seeing younger potential buyers of BTL properties. 

Despite reports of BTL investment losing popularity, the market continues to offer significant appeal to investors, particularly those seeking to build wealth over the long term.

An undying appetite for rental homes 

The enduring demand for rental properties alone underscores the enduring attractiveness of BTL investments. Zoopla recently reported that there are still an average of 12 tenants vying for every available property. Yes, stock availability has increased, but it’s from a low base and remains below pre-pandemic levels. 

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BTL has been around for 30 years, so it stands to reason that some landlords may now be looking at winding down their lettings careers, perhaps passing on properties to relatives or business partners, consolidating their portfolios or exiting the sector altogether. 

This means that a new generation of landlords entering the market, or those smaller landlords expanding their operations, is not just encouraging; it is vital if we’re to remedy the long-term structural rental market supply-demand imbalance.

While volatility in the swaps market has kept lenders on their toes, rates have generally eased since their 2023 peak, and we’re operating in a more stable environment. More mortgage products are now available, and lending criteria have become more flexible. Returns remain, too, with our own figures recently revealing a 14-year high in yields. 

These improving conditions do seem to be having a tangible effect on landlord borrowing appetite. Our recent half-year results reveal a 25% increase in BTL lending, and this aligns with the broader market, with previously published UK Finance data highlighting significant year-on-year increases in new BTL advances. 

But it’s not just new purchases where we expect to see younger landlords targeting their capital.

A shift in the BTL market 

Given the rapid acceleration of landlords utilising limited company structures over the past decade, we are expecting a greater occurrence of inter-company transfers, where landlords seeking an exit from the market sell their portfolio via a limited company sale, rather than properties individually. We have recently closed two such transactions and are anticipating growing demand for this type of deal.

Given the pressures facing tenants in the market, it is important that existing rental properties remain in the sector, and this is an effective method of ensuring that this occurs.