The cost of living crisis has significantly strained household finances, making property investment less accessible and more challenging. High borrowing costs and elevated house prices have limited affordability, but with interest rates on a downward path, there are signs of recovery. Improving economic conditions offer a glimmer of hope, potentially encouraging renewed confidence among investors.
The primary threat to the market lies in ongoing regulatory and tax pressures. Stricter rules for landlords, such as the proposed Renters’ Rights Bill, and higher stamp duty and capital gains tax rates, are increasing the financial burden on investors. Combined with lingering affordability issues, these challenges risk deterring potential buyers and constraining market growth.
Amid these challenges, younger generations’ interest in property investment presents an opportunity for growth. By offering indirect investment options or tailored guidance on affordability, providers can bridge the gap for some of these young investors. This approach should enable greater participation, broadening access to property markets.
This report looks at the following areas:
- The short-, medium- and long-term impact of the economic climate on buy-to-let lending.
- Ownership of rental properties and consideration of property investment.
- Reasons for investing in property, alongside concerns about investing in property.
- Consumer attitudes towards investing in property, including perspectives on property prices, rules and regulations, and indirect property investments.
- Examination of buy-to-let providers’ strategies, including competitive approaches and innovative initiatives in the sector.
Affordability and regulations challenge property investment, but falling interest rates and varied group interest show there are still opportunities.
Stefania Apostol, Senior Financial Services Analyst
Market Definitions
The main focus of this Report is on residential buy-to-let. Additionally, the consumer research also considers other types of investment property, such as second homes, holiday lets and commercial property let.
Mintel uses the following definitions:
- Buy-to-let properties are properties bought with the purpose of renting them out. They may be purchased outright or with a mortgage. They may also be inherited or have previously been used as a main residence.
- A buy-to-let mortgage is a special type of mortgage advanced on a property that is, or is intended to be, let to tenants. Viewed as a form of commercial lending, buy-to-let mortgages fall under the remit of the PRA.
- A second/holiday home is defined as a property that is not the ‘sole or main residence’ of an individual. A second home mortgage is a type of residential mortgage for buying such a property. Some homeowners release equity in their ‘main residence’ home to fund or part-fund a second-home purchase.
- Holiday let property is where a property is let for the purpose of a holiday or short stay only. Many owners of such property advertise on a holiday letting platform, such as Airbnb and Booking.com.
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EXECUTIVE SUMMARY
- Opportunities for investing in property
- Help consumers harness their interest in property investment
- Support investors through challenging conditions
- Rising house prices create challenges and opportunities
- Market dynamics and outlook
- Market size & forecast
- Market predictions
- The buy-to-let market is expected to face challenges
- Lloyds Banking Group maintains its leading position
- Key market drivers
- Property investors face evolving regulatory challenges and rising costs
- What consumers want and why
- Ownership of investment properties is limited
- Enthusiasm for property investment is robust
- Younger generations show great interest in property investment
- Property investment attracts for various reasons
- High purchase cost is the main concern about buying an investment property
- Property prices are seen as too high to make property investment worthwhile
- Innovation and marketing
- Lenders enhance tools to support brokers and landlords
- Santander and KRFI introduce 1-year fixed rate buy-to-let mortgage
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MARKET DYNAMICS
- Market size
- High interest rates and a difficult economic environment impacted new buy-to-let lending…
- Graph 1: gross buy-to-let mortgage lending, 2019-24
- …but there are signs of recovery
- Market forecast
- The buy-to-let market is expected to face challenges…
- …due to economic and regulatory pressures
- Market segmentation
- House purchases and remortgaging impacted by high interest rates
- Graph 2: new buy-to-let mortgages, by purpose of loan, 2019-23
- Market share
- Lloyds maintains its leading position, despite a decline in outstanding mortgage balances
- Nationwide retains its second position
- OneSavings Bank increases its BTL outstanding balances
- Market drivers
- The UK’s economy improves
- Graph 3: CPI inflation rate, 2021-24
- Financial wellbeing is fragile
- Graph 4: financial wellbeing index, 2016-24
- The average UK house price continues to rise
- Graph 5: average house price, 2005-24
- Interest rates remain high
- Graph 6: monthly buy-to-let mortgage rates at 75% LTV, 2-year and 5-year fixed-rate, 2014-24
- Private rents continue to rise
- Graph 7: average private rent in Great Britain, 2015-24
- Rent demand is expected to remain strong
- Graph 8: trends in tenure, 2008/09-2022/23
- Legislative and regulatory changes
- Renters’ Rights Bill enhances security for tenants
- The Autumn Budget 2024 brings tax changes
- Leasehold reforms enhance rights
- Rental properties may have to undergo energy efficiency upgrades
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WHAT CONSUMERS WANT AND WHY
- Ownership of investment properties
- Rental properties or second homes are not widely owned
- Graph 9: ownership of financial assets, 2024
- Rentals are one of the most common types of property investment
- Graph 10: ownership of investment property or second home, 2024
- Many property investors have a mortgage…
- Graph 11: investment property or second home owned with a mortgage, 2024
- …especially those owning multiple properties
- Graph 12: number of investment properties owned, UK
- Future property investment consideration
- Enthusiasm for property investment is robust
- Graph 13: future property investment consideration, 2024
- Younger generations have greatest property investment aspirations
- Graph 14: future property investment consideration, by generation, 2024
- Londoners are more likely to consider purchasing an investment property
- Graph 15: future property investment consideration, by region, 2024
- Existing investors show great interest in pursuing property investments
- Graph 16: future property investment consideration, by ownership of investment property, 2024
- Reasons for investing in property
- Varied motivations drive interest in property investment
- Graph 17: reasons for investing in property, 2024
- Property value appreciation is one of the main reasons for investing in property
- Existing property investors are more likely to cite the potential for a consistent income stream as a reason for investing in property
- Graph 18: potential for a consistent income stream as a reason for property investment, by existing and potential investors, 2024
- Crypto investors appreciate real estate’s stability and security
- Graph 19: selected reasons for investing in property, by ownership of cryptocurrencies, 2024
- Investors value property for family wealth transfer
- Concerns about investing in property
- High purchase cost is the main concern about buying an investment property
- Graph 20: concerns about investing in property, 2024
- Existing and prospective property investors share concerns about high ongoing costs
- Graph 21: high ongoing costs as a concern about investing in property, by existing and potential investors, 2024
- Property investors are more likely to be concerned about social implications
- Graph 22: social implications as concern about investing in property, by existing and potential investors, 2024
- Existing investors acknowledge diverse challenges in property investment
- Graph 23: repertoire analysis of concerns about investing in property, by existing and potential investors, 2024
- Attitudes towards investing in property
- Affordable housing should be a primary focus for the government
- Graph 24: attitudes towards investing in property, 2024
- Property prices are seen as too high to make property investment worthwhile
- Younger generations see investment properties as the best way to save for retirement
- Graph 25: agreement with the statement ‘An investment property is the best way to save for retirement’, by generation, 2024
- Rules and regulations concern potential investors
- Indirect property investments can bridge the gap in affordability
- Graph 26: agreement with the statement ‘Indirect property investments offer an easier way to invest in real estate’, by generation, 2024
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INNOVATION AND MARKETING TRENDS
- Competitive strategies
- Nationwide continues to focus on the buy-to-let market through broker-driven solutions
- NatWest refines buy-to-let mortgage proposition
- Paragon streamlines buy-to-let mortgages
- Lloyds ventures into the rental market
- Launch activity and innovation
- ModaMortgages, a new specialist buy-to-let mortgage lender, announces a controlled launch
- Foundation Home launches consumer buy-to-let mortgages
- Santander and KRFI introduce 1-year fixed rate buy-to-let mortgage
- Metro Bank launches mortgage for landlords using limited companies
- Paragon Bank offers financing to modernise rental properties
- Virgin Money’s Retrofit Boost supports energy-efficient property upgrades
- HSBC expands international BTL mortgages
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APPENDIX
- Supplementary data
- Top ten buy-to-let lenders, by amounts outstanding
- Top ten buy-to-let lenders, by gross lending
- Market forecast data and methodology
- Market size: underlying data
- Market forecast and prediction intervals
- Forecast methodology
- Report scope and definitions
- Market definition
- Abbreviations and terms
- Consumer research methodology
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