You can still feel cheerful about buy-to-let – Goodall

The sector is continuing to grow, and as demand holds strong there remains real scope for lenders, landlords and tenants to benefit from the world of buy-to-let.

We must acknowledge there have been challenges to the sector in recent years and subsequently top line lending figures have slowed, and growth expectations have lowered.

However, these figures paint a more pessimistic picture than the reality.

Since 2006 UK Finance (previously the Council of Mortgage Lenders) has published quarterly data on the buy-to-let mortgage market.

In terms of both the number of mortgages outstanding and the value of those mortgages, there has not been a single quarter which has reported a decline.

Meanwhile, Bank of England figures mask the reality of the market by excluding buy-to-let borrowing through limited companies or to landlords who remortage with the same lender at the end of the fixed contract.

The former is especially pertinent as in the first three quarters of 2017 seven in 10 buy-to-let applications were made through a limited company, up from 45% in 2016 as a whole.

Withstanding difficulties

The buy-to-let sector has historically managed to withstand difficult times, and it is well placed to battle against the challenges that are yet to come.

During the credit crunch, funding for mortgages suffered serious cuts. However, the outstanding number of buy-to-let mortgages grew whilst arrears remained low.

And now, despite all the challenges we’re still confident about the continued growth of the market, particularly in the professional segment.

If you’re looking for evidence, the 4.5m people relying on the private rental sector should be enough proof, and this shows no sign of falling any time soon.

Real lending increase

As the sector professionalises, we’re likely to see even more landlords holding their property in limited companies, so while new lending as currently measured may continue to fall, real lending will increase.

This will all become clearer when the Bank of England starts including limited company data in its figures from the second half of this year.

For landlords, those structuring and growing their portfolios efficiently will continue to see buy-to-let provide a decent sustainable return.