In February 2012, we released the results of our last intermediary survey which showed that 81% of respondents believed the buy-to-let market in 2012 would be at least as strong as the sector was in 2011.
I am delighted to say that, looking at the latest industry figures released in August, the optimists have been vindicated. Indeed, year-on-year, the buy-to-let market has grown strongly, with the volume of loans up 14%, from 29,100 and the amount advanced up 18%, from £3.3bn.
What is behind this robust growth which has seen the number of buy-to-let mortgages climb from 89,000 a decade ago to 1.42m today.
First, many landlords see housing as an attractive asset class and a hedge against inflation as well as a place to live. And with the value of the average home soaring from £103,501 in Q2 2002 to £164,955 in Q2 2012 according to Nationwide, their confidence seems to have been well founded.
Not only that but a successful buy-to-let investment is to a certain extent self-funding, as the rental income should exceed the mortgage interest by a significant margin.
Finally, with the population growing but it proving difficult for people to get on the housing ladder, one market’s stagnation is another’s growth opportunity. These attributes are very attractive for landlords especially with the current market turmoil.
As these factors are unlikely to change in the near term, we believe that further growth in buy to let is inevitable, and that it will continue to be an important product set not only for lenders but intermediaries as well.
John Heron is managing director of Paragon Mortgages
