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UK Property as an Investment Market Report

Everything you need to make the right decisions

Providing the most comprehensive and up-to-date information and analysis of the Property as an Investment market, and the behaviours, preferences and habits of the consumer.

Mintel has the answers you’re looking for

What are the key challenges facing the industry and how fast are its rates of growth? Who is the consumer and what do they want? Where are the opportunities, where are the risks and what lies ahead?

Market definition

This Report examines the UK market for property investment and second home ownership. This encompasses residential buy-tolet, properties let to family and second/holiday homes, located in the UK and abroad.

For the purposes of this Report, Mintel has used the following definitions:

  • Second properties refer to properties that are owned and used by family/friends as a holiday home (ie not a main residence), let to others as a holiday let, for occupation while working away from home, rented or other. They may be purchased or bought with a mortgage. They may also be inherited.
  • Second homes are a sub-set of the above and refer to second properties that are kept for personal use, as opposed to being rented out to tenants.
  • Buy-to-let properties are properties bought with the purchase of renting them out. They may be purchased outright or with a mortgage.
  • 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, they fall under the remit of the Prudential Regulation Authority (PRA).

Expert analysis from a specialist in the field

Written by Sarah Hitchcock, a leading analyst in the Financial Services sector, her extensive knowledge delivers in-depth commentary and analysis to highlight current trends and add expert context to the numbers.

The buy-to-let mortgage market is expected to see slower growth in relation to house purchase going forward, reflecting a harsher regulatory climate and less favourable market conditions. High house prices and higher borrowing costs, as well as greater upfront expense for those who already own property, will likely make the purchase of a second or further property too much of a stretch for some prospective investors. Sarah Hitchcock
Senior Financial Services Analyst

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Table of contents

  1. Overview

    • What you need to know
      • Market definition
      • Executive Summary

          • The market
            • Stamp duty increase and regulatory changes hit buy-to-let market
              • Figure 1: Forecast of new buy-to-let mortgage advances – Fan chart, 2012-22
            • Remortgage business will drive future growth
              • Recent regulatory and tax changes impacting market
                • Tenant demand remains strong
                  • New investors may be deterred by higher interest rates
                    • Companies and brands
                      • LBG and Nationwide are the largest buy-to-let lenders
                        • Figure 2: Share of buy-to-let market, by amounts outstanding (selected lenders), 2017
                      • The market attracts some new entrants
                        • Lenders respond differently to changing market forces
                          • The consumer
                            • 5% of UK adults own a second property…
                              • Figure 3: Number of properties owned, April 2018
                            • …15% of these inherited their property
                              • Figure 4: Reasons for owning second home or rental property, April 2018
                            • 39% are expecting to sell a second property in the next two years
                              • Figure 5: Short-term property plans, April 2018
                            • Longer-term plans
                              • Many buy-to-let investors are feeling the pressure
                                • Figure 6: Attitudes towards buy-to-let investment by existing investors, April 2018
                              • 45% of rental property owners are concerned about interest rates rising
                                • Figure 7: Mortgage ownership, tax status change, and concerns about borrowing rates, April 2018
                              • 80% of second property owners say buying property is a good long-term investment
                                • Figure 8: Agreement with statements about property investment and second home ownership, April 2018
                              • 11% of non-owners want to buy a second property within two years
                                • Figure 9: Proportion of non-second home owners who are planning to buy additional/investment property, April 2018
                              • What we think
                              • Issues and Insights

                                • Scope to target first-time property owners
                                  • The facts
                                    • The implications
                                      • Owning a second home is a popular aspiration, but many could be hampered by a less favourable regulatory and tax environment
                                        • The facts
                                          • The implications
                                          • The Market – What You Need to Know

                                            • Buy-to-let accounts for 17% of all mortgages but lending fell last year…
                                              • …due to reduced demand for house-purchase loans…
                                                • …linked to adverse changes to tax and regulation
                                                  • The market will continue to be sustained by strong tenant demand
                                                    • New investors may be deterred by higher interest rates
                                                    • Market Size and Forecast

                                                      • Buy-to-let represents 17% of all mortgages
                                                        • Figure 10: Number of buy-to-let mortgages outstanding, 2006-17
                                                      • 2017 sees first fall in new business since 2009
                                                        • Figure 11: Volume and value of new buy-to-let mortgages, 2013-17
                                                      • Market outlook: future growth driven by remortgage market
                                                        • Figure 12: Forecast of new buy-to-let mortgage advances – Fan chart, 2012-22
                                                        • Figure 13: Forecast of new buy-to-let mortgage business, 2013-22
                                                      • Forecast methodology
                                                      • Market Segmentation

                                                        • Far fewer loans for house-purchase taken out in 2017
                                                          • Figure 14: New buy-to-let mortgages, by purpose of loan, 2013-17
                                                        • Remortgage activity should remain strong, over the short term at least…
                                                          • …although some landlords may find the stricter lending rules a problem
                                                          • Market Drivers

                                                            • Ownership of second homes
                                                              • Figure 15: Second properties owned in the UK or abroad, 2013-14
                                                            • What makes property so alluring?
                                                              • It’s tangible
                                                                • It’s a good long-term investment
                                                                  • It can be passed on
                                                                    • There is strong tenant demand for private rented property
                                                                      • Becoming a property investor has become much more difficult
                                                                        • Could interest in overseas investment increase?
                                                                          • Significant increase in more serious buy-to-let arrears, but total number still only accounts for a tiny fraction of all mortgages
                                                                            • Demand for buy-to-let mortgages expected to weaken in 2018…
                                                                              • Figure 16: Demand for buy-to-let and prime lending (quarterly basis), Q1 2012-Q1 2018
                                                                            • …while spreads are predicted to narrow significantly
                                                                              • Figure 17: Spreads on buy-to-let lending (quarterly basis), 2012-17
                                                                          • Regulatory and Legislative Changes

                                                                            • Tax changes and tighter lending rules create a tougher environment
                                                                              • Figure 18: Summary of tax and regulatory changes affecting the buy-to-let market, 2016 onwards
                                                                              • Figure 19: Stamp duty land tax rates for residential and additional properties, from April 2016
                                                                              • Figure 20: Schedule of changes to tax relief available to landlords, 2017/18-2020/21
                                                                            • Unoccupied second homes face higher council tax bills
                                                                            • Companies and Brands – What You Need to Know

                                                                              • The largest lenders…
                                                                                • …and the best performers
                                                                                  • New arrivals
                                                                                    • Different lenders adopt different strategies
                                                                                    • Market Share

                                                                                      • Largest lender, LBG, sees further erosion of market share
                                                                                        • Figure 21: Buy-to-let amounts outstanding by selected lenders and estimated market share, 2014-17
                                                                                      • Nationwide and RBS both see fall in new buy-to-let lending in 2017
                                                                                        • Barclays sees strong rise in buy-to-let balances in 2017
                                                                                          • Significant others
                                                                                          • Competitive Strategies

                                                                                            • A crowded market but with scope for new entrants to emerge
                                                                                              • More lenders target ‘consumer’ market
                                                                                                • Others focus on limited companies and professional landlords
                                                                                                  • Barclays targets first-time buyer landlords
                                                                                                    • Precise Mortgages launches income supported buy-to-let deal
                                                                                                      • Lenders start to soften their criteria to ease supply pressures…
                                                                                                        • …while some lenders withdraw support for portfolio landlords
                                                                                                        • The Consumer – What You Need to Know

                                                                                                          • 5% of UK adults own a second property…
                                                                                                            • …15% of these inherited their property
                                                                                                              • 39% are expecting to sell a second property in the next two years
                                                                                                                • Many buy-to-let investors are feeling the pressure
                                                                                                                  • 11% of non-owners want to buy a second property within two years
                                                                                                                  • Ownership of Financial and Property Assets

                                                                                                                    • A small proportion of UK adults own a second property…
                                                                                                                      • Figure 22: Ownership of financial and property assets, April 2018
                                                                                                                    • …and this is largely the preserve of the wealthy
                                                                                                                      • Figure 23: Proportion who own a second/holiday home or rental property, by socio-economic group and gross annual household income, April 2018
                                                                                                                    • Most of those with a second home or rental property are owner-occupiers
                                                                                                                      • Two fifths of multiple property owners own property abroad
                                                                                                                        • Figure 24: Type of property owned, April 2018
                                                                                                                      • Just 9% of rental/second property owners have four or more properties
                                                                                                                        • Figure 25: Number of properties owned, April 2018
                                                                                                                    • Reasons for Owning Second Property

                                                                                                                      • 45% of buy-to-let investors are investing for income, while 40% see it as long-term investment
                                                                                                                        • Figure 26: Reasons for owning second home or rental property, April 2018
                                                                                                                      • 12% intend to eventually move into their investment or second property
                                                                                                                        • 14% have bought additional property for a child at university
                                                                                                                        • Short- and Long-term Plans

                                                                                                                          • More intend to sell than buy
                                                                                                                            • Mortgage intentions
                                                                                                                              • Figure 27: Short-term property plans, by owner type, April 2018
                                                                                                                            • 8% intend to turn a second property into their main residence
                                                                                                                              • Only half are intending to ultimately sell up
                                                                                                                                • Figure 28: Long-term investment property plans, by owner type, April 2018
                                                                                                                              • A third intend to pass on the property to family or others
                                                                                                                              • Buy-to-let Investors – Attitudes and Experiences

                                                                                                                                • Buy-to-let lenders are starting to feel the pressure…
                                                                                                                                  • Figure 29: Attitudes towards buy-to-let investment by existing investors, April 2018
                                                                                                                                • …45% are concerned about future rise in interest rates
                                                                                                                                  • Figure 30: Mortgage ownership, tax status change, and concerns about borrowing rates, April 2018
                                                                                                                                • Growing interest in switching status to a limited company
                                                                                                                                • Attitudes toward Investing in Property

                                                                                                                                  • 65% of second property owners think the stamp duty surcharge is unfair
                                                                                                                                    • Figure 31: Agreement with statements about property investment and second home ownership, April 2018
                                                                                                                                • Prospective Buy-to-let Investors and Second Home Owners

                                                                                                                                  • Fairly even interest in overseas as in UK property
                                                                                                                                    • Figure 32: Proportion of non-second home owners who are planning to buy additional/investment property, April 2018
                                                                                                                                  • Interest in buy-to-let remains healthy
                                                                                                                                  • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                                      • Abbreviations
                                                                                                                                        • Consumer research methodology
                                                                                                                                        • Appendix – Market Size and Forecast

                                                                                                                                          • Total market value forecast – best- and worst-case scenarios
                                                                                                                                            • Figure 33: Forecast of buy-to-let mortgage advances – best- and worst-case scenarios, at current prices, 2017-22
                                                                                                                                          • House-purchase sector forecast
                                                                                                                                            • Figure 34: Forecast of new buy-to-let house-purchase advances – Fan chart, 2012-22
                                                                                                                                            • Figure 35: Forecast of buy-to-let house-purchase advances – best- and worst-case scenarios, at current prices, 2017-22
                                                                                                                                          • Remortgage sector forecast
                                                                                                                                            • Figure 36: Forecast of buy-to-let remortgage advances – Fan chart, 2012-22
                                                                                                                                            • Figure 37: Forecast of buy-to-let remortgage advances – best- and worst-case scenarios, at current prices, 2017-22
                                                                                                                                          • Forecast methodology