Buy-to-let surges as first time buyer activity retreats

Landlord Expert
By Landlord Expert June 1, 2015 12:25

May has witnessed a stand-out acceleration in property valuations for buy-to-let landlords, while first time buyer activity has retreated, according to the latest research from Connells Survey and Valuation.

There were 33% more buy-to-let valuations conducted in May than at the same time last year. Conversely, valuations for first time buyers declined by 4% over the same period. 

On a monthly basis, May’s buy-to-let valuations were up 3% on April, while valuations for First Time Buyers fell 2% between the two months.

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John Bagshaw, Corporate Services Director of Connells Survey & Valuation, comments“Britain’s buy-to-let market is booming right now as would-be landlords are eager to enter the sector and current landlords look to expand. 

“However for first time buyers, May was not just less positive than the rest of the housing market, but also disappointing in comparison to the previous month. Previously, valuations for new buyers had proved resilient in April, even when uncertainty about the impact of the election result on home-buyers was at fever pitch.

“The picture painted here is a consistent one. Fewer people looking to buy their first home means more tenants sticking to the rental sector. As such, new landlords enter the market and those already in the sector grow their business to capitalise on the increased demand. Yet what remains unclear is how long this contrast in fortunes will continue.” 

May’s remortgaging figures also outperformed the overall housing market, with these valuations up 9% on April’s figures. This equates to a 31% increase on the number of remortgaging valuations since May 2014. 

Meanwhile, valuations for those existing home-owners looking not to remortgage but to move to a new property posted a 4% increase since April. This has contributed to an 8% increase in the number of home-owner valuations since May 2014.

John Bagshaw continues: Remortgaging is going from strength to strength right now. Record-low mortgage rates are the main reason for this, and with inflation still near zero and flirting with a negative reading, the Bank of England is likely to play it safe and keep rates at bargain-basement levels for the foreseeable future.

“Yet the recent cooling in home mover activity points at another cause for the remortgage rush. Increasingly, home owners are opting to upgrade the property they already have, be it through a loft conversion, conservatory or major face lift, rather than sell up and get a new one. In short, people are improving not moving. 

“People feel financially secure enough to use their home as a guarantee against which to raise big capital – a sentiment that was absent for some time immediately after the crash. However, they still don’t feel the property market overall is safe enough to risk trading up what they already have. For a government reliant on movement further up the property chain to spur first time buyer activity, these lacklustre home mover figures will both partially explain the disappointment of the poor first time buyer results, and compound the problems.” 

Across all sections of the housing market, overall valuation activity for all purposes has grown by 3% on a monthly basis, between April and May. On an annual basis, 13% more valuations were carried out than in May 2014.  

John Bagshaw concludes: “Confidence is returning to the housing market, but it is by no means evenly spread across all sectors. The post-election lifting of the threat of state-imposed rent caps and tenancy controls has led to an activity surge from the buy-to-let market. But aside from landlords, people seem more inclined to stick with the status quo for now.

“A sustained but minimal up-tick in real-terms wages benefits those looking to remortgage – but not necessarily movers.  Clearly the timid growth in movement from current home-owners suggests that racing up the property ladder – upgrading to ever pricier, larger, smarter and better situated homes – is no longer the priority it was pre-crash for those who have been home-owning for some time.”

Landlord Expert
By Landlord Expert June 1, 2015 12:25

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