In the UK, the demand for housing completely outstrips supply and we don’t expect this to reach parity until 2027 at the earliest. As a result, we face a large shortfall.
Auctions are more popular than they previously have been, but some experienced landlords are unable to purchase these properties as lenders would prefer properties to be readily rentable. Whilst bridging is an option, it can still be too expensive whilst the exit to a traditional loan is not always as easy as predicted.
Companies such as The Mortgage Works and Precise do offer buy-to-let refurbishment products, but very few others do. There are many deals for the first-time landlords and landlords with only three or four properties.
While it is understandable that lenders don’t want to be overexposed, there are many properties that would benefit from offering products to experienced landlords able to execute a property upgrade quickly and effectively.
The government policy on managing and reducing waste states that we want to move towards a ‘zero waste economy’. This doesn’t mean that no waste exists – it’s a society where resources are fully valued, financially and environmentally. It means we reduce, reuse and recycle all we can, and throw things away only as a last resort.
Why can we not use the same maxim for housing? We have landlords ready, willing and able. What would be useful is if the government and lenders could agree some form of joint policy to try and achieve a zero waste economy for our housing market.
What are needed are more lenders offering a buy-to-let refurbishment option. A buy-to-let refurbishment product with tiered interest rates to ensure that all works are achieved in a timely fashion would work really well. Lenders could protect themselves within the product to deter any investors who are looking to churn these properties for quick profit and use them as a low cost bridge. There is also a space for more products similar to Precise’s bridge-to-let product.
As some streets are just empty houses then investors may not wish to buy and be the only property, plus letting could be troublesome to say the least. Talking to a well respected industry colleague recently he reminded me of a scheme that was used in the late 1980s/early 1990s where the local authority and private companies worked together to upgrade the whole street in one go, thus bringing back bulk properties to the market. Would this scheme not work now?
We have houses empty needing professional TLC which could provide houses for rent to a nation in need of homes. Plus we have a situation where buy-to-let lending is on the increase and private renting is becoming more socially acceptable. Worked correctly there is a measured risk that government, local authorities and lenders could support, thus bringing empty homes back into use.
Martin Reynolds is chief executive at SimplyBiz Mortgages