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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? Who is the consumer and what do they want? Where are the opportunities, where are the risks and what lies ahead?

Covered in this report

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 outright 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 mainly for personal use, as opposed to being rented out to tenants. However, they may include occasional lets.
  • Buy-to-let properties are properties bought with the purpose 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 PRA (Prudential Regulation Authority).

Expert analysis from a specialist in the field

Written by Irene Salazar, 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.

Following a challenging 2017, the buy-to-let market returned to growth in 2018. The sector is adjusting to the ‘new normal’ in terms of regulatory environment. Attracting investors may be harder, but there is an opportunity for providers to launch specialised products and create value with expert advice, reflecting market trends and consumer demand, such as the growing interest in Airbnb Irene Salazar
Financial Services Analyst

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Table of contents

  1. Overview

    • What you need to know
      • Products covered in this Report
      • Executive Summary

          • The market
            • New loans return to growth in 2018
              • Growth driven exclusively by remortgaging activity
                • Figure 1: Forecast of new buy-to-let mortgage advances – Fan chart, 2013-23
              • Demand for buy-to-let mortgages continues to be weak
                • House prices in England fall for the first time in seven years
                  • A higher proportion of households own their home
                    • 30% of people interested in investing in property
                      • Figure 2: Interest in property investments, January 2019
                    • Awareness of indirect property investments is low
                      • Figure 3: Awareness of indirect property investments, January 2019
                    • Latest regulatory and legislative changes
                      • Companies and brands
                        • Mixed results among largest lenders in 2018
                          • Figure 4: Estimated market share of buy-to-let amounts outstanding, selected lenders, 2018
                        • Longer fixed-rate deals are becoming more common (and flexible)
                          • Lenders cut rates and look to make their deals more attractive
                            • Providers start looking into Open Banking
                              • Industry taking action to stop discrimination of tenants on benefits
                                • The consumer
                                  • 6% of people are landlords
                                    • Figure 5: Ownership of investment property, January 2019
                                  • 7% have owned their investment for less than a year
                                    • Figure 6: Length of ownership of investment property, January 2019
                                  • Majority of investors likely to stay put
                                    • Figure 7: Short-term property plans, January 2019
                                  • Changes in personal circumstances main reason to end investment
                                    • Figure 8: Reasons to stop investing in property, January 2019
                                  • Main concerns relate to covering unanticipated expenses
                                    • Figure 9: Concerns about investing in property, January 2019
                                  • Recognising the Airbnb opportunity
                                    • Figure 10: Attitudes towards investing in property, January 2019
                                  • Identifying clusters and target groups
                                    • Figure 11: Attitudes towards investing in property, cluster groups, January 2019
                                  • What we think
                                  • Issues and Insights

                                    • Certainty and flexibility: remortgaging trends will incentivise switching
                                      • The facts
                                        • The implications
                                          • Market moving towards specialised products and expert advice
                                            • The facts
                                              • The implications
                                              • The Market – What You Need to Know

                                                • New loans return to growth in 2018
                                                  • Growth driven exclusively by remortgaging activity
                                                    • Demand for buy-to-let mortgages continues to be weak
                                                      • Home ownership rose in 2017/18
                                                        • 30% of people interested in investing in property
                                                          • A tougher environment
                                                          • Market Size and Forecast

                                                            • Buy-to-let growth slows down
                                                              • Figure 12: Number of buy-to-let mortgages outstanding, and buy-to-let share of total number of mortgages outstanding, 2008-18
                                                            • New loans return to growth in 2018
                                                              • Figure 13: Volume and value of new buy-to-let mortgages, 2014-18
                                                            • Market forecast: remortgaging activity to drive future growth
                                                              • Figure 14: Forecast of new buy-to-let mortgage advances – Fan chart, 2013-23
                                                              • Figure 15: Forecast of new buy-to-let mortgage business, 2013-23
                                                            • Forecast methodology
                                                            • Market Segmentation

                                                              • Growth driven exclusively by remortgaging activity…
                                                                • Figure 16: New buy-to-let mortgages, by purpose of loan, 2014-18
                                                              • …which now accounts for over 70% of new business
                                                                • Figure 17: Remortgaging activity as a percentage of total new buy-to-let business, 2014-18
                                                            • Market Drivers

                                                              • Demand for buy-to-let mortgages continues to be weak…
                                                                • Figure 18: Demand for buy-to-let and prime lending, Q1 2014-Q4 2018
                                                              • …and the overall market is becoming tougher for investors and lenders
                                                                • Base rate at highest level since the financial crisis
                                                                  • House prices in England fall for the first time in seven years
                                                                    • A higher proportion of households own their home
                                                                      • Figure 19: England housing stock, by tenure, 2000-2017/18
                                                                    • Interest in property investments
                                                                      • A third interested in investing in property
                                                                        • Mum and Dad: bank or landlords?
                                                                          • Investing in holiday homes abroad as attractive as in the UK
                                                                            • Self-build and renovation projects as an investment
                                                                              • Figure 20: Interest in property investments, January 2019
                                                                            • Awareness of indirect property investments
                                                                              • Awareness is low
                                                                                • Figure 21: Awareness of indirect property investments, January 2019
                                                                              • The potential of property-backed and innovative finance ISAs
                                                                                • Figure 22: Propio’s property IFISA London Underground Ad, March 2019
                                                                            • Regulatory and Legislative Changes

                                                                              • A tougher environment
                                                                                • HMO mandatory licensing is extended
                                                                                  • Changes introduced in the 2019/20 tax year
                                                                                    • Phasing out of tax relief enters third stage…
                                                                                      • …and new tax credit now applies to 75% of mortgage interest
                                                                                        • Figure 23: Schedule of changes to tax relief available to landlords, 2017/18-2020/21
                                                                                      • CGT allowance reaches £12,000
                                                                                        • Homes Act comes into force
                                                                                          • Rules introduced to protect money held by agents
                                                                                            • Ban on letting fees to take effect
                                                                                              • All rental properties to have a minimum ‘E’ EPC rating
                                                                                                • Parliamentary inquiry into ‘No DSS’ restrictions
                                                                                                • Companies and Brands – What You Need to Know

                                                                                                  • Mixed results among largest lenders in 2018
                                                                                                    • Longer fixed-rate deals are becoming more common (and flexible)
                                                                                                      • Lenders cut rates and look to make their deals more attractive
                                                                                                        • Providers start looking into Open Banking
                                                                                                          • Industry taking action to stop discrimination of tenants on benefits
                                                                                                          • Market Share

                                                                                                            • LBG and RBS lose market share…
                                                                                                              • …as competitors step up
                                                                                                                • Figure 24: Buy-to-let amounts outstanding, by selected lenders and estimated market share, 2015-18
                                                                                                              • Coventry BS and Paragon report positive performance
                                                                                                              • Competitive Strategies

                                                                                                                • Longer fixed-rate deals are becoming more common (and flexible)
                                                                                                                  • Paragon introduces online product switching feature
                                                                                                                    • Lenders have been cutting rates…
                                                                                                                      • …and exploring other ways to make their deals more attractive
                                                                                                                        • Dedicated-purpose mortgages reflect a more complex market
                                                                                                                          • HMO BTL
                                                                                                                            • Expat BTL
                                                                                                                              • Holiday BTL
                                                                                                                                • Refurb BTL
                                                                                                                                  • Industry taking action to stop discrimination of tenants on benefits
                                                                                                                                  • Launch Activity and Innovation

                                                                                                                                    • Providers start looking into Open Banking
                                                                                                                                      • Mojo developing Mortgage Matcher with Open Banking
                                                                                                                                        • Other Open Banking developments and partnerships
                                                                                                                                          • Digital-only Molo launches with buy-to-let mortgages
                                                                                                                                            • Figure 25: Molo Finance advertising
                                                                                                                                          • New entrants catering for professional landlords…
                                                                                                                                            • …and limited companies
                                                                                                                                              • Shawbrook Bank extends access to eTech BTL hub
                                                                                                                                              • The Consumer – What You Need to Know

                                                                                                                                                • 6% of people are landlords
                                                                                                                                                  • 7% have owned their investment for less than a year
                                                                                                                                                    • Majority of investors likely to stay put
                                                                                                                                                      • Changes in personal circumstances main reason to end investment
                                                                                                                                                        • Main concerns relate to covering unanticipated expenses
                                                                                                                                                          • Recognising the Airbnb opportunity
                                                                                                                                                            • Identifying clusters and target groups
                                                                                                                                                            • Ownership of Investment Property

                                                                                                                                                                • 6% of people are landlords
                                                                                                                                                                  • A further 7% are interested in buying investment property
                                                                                                                                                                    • Figure 26: Ownership of investment property, January 2019
                                                                                                                                                                  • Length of ownership of investment property
                                                                                                                                                                    • Figure 27: Length of ownership of investment property, January 2019
                                                                                                                                                                • Funding of Investment Property

                                                                                                                                                                  • 51% of investors used a mortgage
                                                                                                                                                                    • Figure 28: Funding of investment property, January 2019
                                                                                                                                                                • Short-term Property Plans

                                                                                                                                                                  • Three in 10 are considering rent rises
                                                                                                                                                                    • 27% have considered selling up
                                                                                                                                                                      • Figure 29: Short-term property plans, January 2019
                                                                                                                                                                    • Mortgage-specific plans
                                                                                                                                                                    • Reasons to Stop Investing in Property

                                                                                                                                                                      • Personal circumstances the main reason to stop investing
                                                                                                                                                                        • A third would be influenced by market conditions
                                                                                                                                                                          • 27% wouldn’t stop investing in property
                                                                                                                                                                            • Figure 30: Reasons to stop investing in property, January 2019
                                                                                                                                                                        • Concerns about Investing in Property

                                                                                                                                                                            • Main concerns relate to covering unanticipated expenses…
                                                                                                                                                                              • …and less so to market conditions
                                                                                                                                                                                • Figure 31: Concerns about investing in property, January 2019
                                                                                                                                                                              • Addressing ethical concerns
                                                                                                                                                                                • Indirect property investments as an alternative
                                                                                                                                                                                  • Older generations more likely to have multiple concerns
                                                                                                                                                                                    • Figure 32: Repertoire of concerns about investing in property, by generation, January 2019
                                                                                                                                                                                • Attitudes towards Investing in Property

                                                                                                                                                                                  • Parents are a key demographic…
                                                                                                                                                                                    • …but men need more reassurance
                                                                                                                                                                                      • Figure 33: Attitudes towards investing in property, January 2019
                                                                                                                                                                                    • Recognising the Airbnb opportunity…
                                                                                                                                                                                      • Figure 34: Agreement with “Companies such as Airbnb make it easier than ever to profit from secondary property” – CHAID – Tree output, January 2019
                                                                                                                                                                                    • …and supporting prospective investors
                                                                                                                                                                                      • Figure 35: Airsorted’s London Underground Ad, April 2019
                                                                                                                                                                                  • Target Group Analysis

                                                                                                                                                                                    • Identifying clusters and target groups
                                                                                                                                                                                      • Typical characteristics of each cluster
                                                                                                                                                                                        • Unconvinced
                                                                                                                                                                                          • Pessimistic
                                                                                                                                                                                            • Circumstantial
                                                                                                                                                                                              • Pragmatic
                                                                                                                                                                                                • Figure 36: Attitudes towards investing in property, cluster groups, January 2019
                                                                                                                                                                                              • Interest in investing in property, by cluster groups
                                                                                                                                                                                                • Figure 37: Interest in property investments, by cluster groups, January 2019
                                                                                                                                                                                              • Concerns about investing in property, by cluster groups
                                                                                                                                                                                                • Figure 38: Concerns about investing in property, by cluster groups, January 2019
                                                                                                                                                                                            • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                                                                                                • Abbreviations
                                                                                                                                                                                                  • Supporting information: outline of regulatory changes
                                                                                                                                                                                                    • Figure 39: Summary of tax and regulatory changes affecting the buy-to-let market, 2016-17
                                                                                                                                                                                                    • Figure 40: Stamp duty land tax rates for residential and additional properties, from April 2016
                                                                                                                                                                                                  • Consumer research methodology
                                                                                                                                                                                                    • CHAID analysis methodology
                                                                                                                                                                                                      • Figure 41: Property as an investment – CHAID – Table output, January 2019
                                                                                                                                                                                                    • Cluster analysis methodology
                                                                                                                                                                                                      • Cluster analysis group definitions
                                                                                                                                                                                                        • Positive views:
                                                                                                                                                                                                          • Negative views:
                                                                                                                                                                                                          • Appendix – Market Size and Forecast

                                                                                                                                                                                                            • Total market value forecast – Best- and worst-case scenarios
                                                                                                                                                                                                              • Figure 42: Forecast of buy-to-let mortgage advances – Best- and worst-case scenarios, at current prices, 2018-23
                                                                                                                                                                                                            • Forecast methodology