Trending Market Sectors
The mortgage market continues to fluctuate and transform. Consequently, discerning popular segments within trending market sectors has become complex.
Given each borrower’s distinctive challenges, mortgage brokers hold diverse perspectives. Brokers have varied views on segments experiencing heightened popularity. Many believe the buy-to-let market is a frontrunner in this evolving landscape.
In this comprehensive analysis, we will delve into the intricate dynamics of the mortgage market. We will explore the factors driving preferences among borrowers and brokers. Furthermore, we will shed light on why the buy-to-let sector garners substantial attention in the current environment.
What is the market saying about renters?
In December 2022, the Mortgage Strategy highlighted a changing trend in the rental sector. Government data revealed shifts in the Trending Market Sectors. Traditionally, rental housing was for younger people. However, a new trend is emerging within these sectors. Rental housing is now a choice for all age groups.
Over the past decade, renters aged 45 to 65 surged by 70%. This shows evolving dynamics in the Trending Market Sectors. Notably, the rental market for those aged 55-64 has doubled. These changes present new opportunities for property owners within these sectors.
Paragon’s survey, involving over 2,000 tenants, examined government statistics. It provided insights into evolving trends in the Trending Market Sectors. The survey found 47% of people aged 45 to 64 aspired to own homes. This shapes the segment’s dynamics within the sectors. However, only 19% of this group were saving towards buying property. This reflects financial considerations within these sectors.
Within this age group, 25% had their finances ready and were actively searching for properties. Meanwhile, 4% were finalising their purchase. The majority, 71%, were saving for their homeownership goal. This shows varied readiness stages among this age group in the Trending Market Sectors.
What does this mean for landlords?
The evolving trend of an increasing number of renters aged 45 to 65 and the growing desire for homeownership among this demographic has several implications for property landlords.
Expanding Tenant Pool
Landlords now have a broader tenant pool as more individuals aged 45-65 turn to renting. Consequently, this demographic expansion offers landlords more options for finding suitable tenants.
Diverse Tenant Needs
Landlords may face diverse tenant needs and preferences, as renters are of varying ages. Therefore, it’s essential to be adaptable to meet the requirements of this evolving tenant base. This adaptability could lead to more diverse property offerings and investment strategies.
Demand for Rental Properties
The rising desire for homeownership among those aged 45 to 65 suggests that some renters may transition to homeowners in the future. Landlords should prepare for potential turnover as tenants pursue homeownership goals.
Opportunities for Investment
The growing interest in homeownership among older renters may lead to property investment opportunities. Landlords who understand the property market and can guide the transition from renting to homeownership may find a niche market for their services.
Supporting Renters’ Financial Goals
Property landlords can support older tenants by helping them save for homeownership. Offering flexible lease terms or providing financial guidance related to homeownership can be a value-added service.
The shifting demographics and aspirations of older renters suggest a changing rental market. This presents both challenges and opportunities. Property landlords can adapt by understanding and responding to their tenants’ evolving needs and desires.
Why invest in Buy-to-lets?
A study by the Uswitch page includes relevant buy-to-let statistics for 2023. It offers a comprehensive view of the Trending Market Sectors. This encompasses vital buy-to-let market stats, including the number of approvals, the amount of lending, and its associated value. The study also provides insights into the new buy-to-let rules for 2023 and the best buy-to-let areas to invest in.
Is Investing in Buy-to-Let Right for You?
The question, “Should I invest in buy-to-let?” is frequently asked. Many dream of acquiring property, renting it out, and earning a steady income. Given our profession, one might think we would endorse buy-to-let.
However, we believe in balanced information and providing the right knowledge. With the 3% stamp duty surcharges and new legislation, it’s understandable why landlords might feel uncertain.
In 2023, buy-to-let investments have a larger tax burden than before. Accumulating a 25% deposit adds to the challenge, creating ambiguity. You must know the pros and cons to start this journey and determine if buy-to-let aligns with your goals.
Pros:
Generate an income stream and cover mortgage repayments: Rent out the property for an amount that covers rent and monthly repayments. This may create enough income to cover these expenses, providing an additional passive income.
Long-term investment and gain: Property investing is generally a long-term commitment and can yield great rewards. The value of your property may increase over time, although there’s no certainty, as the value might also drop.
Offset the costs against tax: Include the expenses of managing your rental property on your self-assessment tax return. You may even qualify for a reimbursement.
Cons:
Stamp Duty surcharge: To comply with taxation laws, landlords must pay an additional 3% stamp duty.
The costs of running an empty property: When your rental property is vacant, you must still cover costs like council taxes, mortgage payments, and other upkeep without any rental income.
Damage to the property: Be prepared to cover any damage or repairs should they become necessary during the tenancy.
Exploring Buy-to-Let in a Limited Company Structure
Responsibility and risk.
Before becoming a landlord, you must recognise all your responsibilities. According to the National Landlords Association (NLA), these duties include providing and maintaining suitable housing for tenants and visitors. This housing must be in excellent condition. Landlords must also exercise “a common duty of care” towards tenants and visitors.
The responsibilities a landlord must handle include:
- finding and vetting new tenants
- treating tenants fairly
- handling deposits
- collecting rent
- Ensuring your taxes are paid on time, and all pertinent obligations are met.
- Adhering to safety protocols and undergoing inspections for electricity, gas, and fire protection is paramount.
- Strictly abide by water supply regulations, drainage systems, glazing materials, energy efficiency and general repairs.
Why is it vital to do due diligence?
A buy-to-let mortgage might seem lucrative, yet it carries significant risks. Firstly, the rental market is volatile and can be influenced by various factors. These include the economy’s state, interest rate changes, and falling house prices. Moreover, keeping up with mortgage payments can be challenging if tenants fail to pay rent on time.
Your decision to take out a buy-to-let mortgage should be based on carefully considering all risks and rewards. Although it may seem easy to make money, you must be prepared for many responsibilities. You can manage these responsibilities effectively with the proper research, planning, and due diligence, such as:
- It is in the UK.
- Isn’t a house in multiple occupancies (HMO), such as a student let?
- It can be under an assured shorthold tenancy (AST) or company let agreement.
- Has a minimum property valuation amount of £75,000
- Has a minimum energy performance certificate (EPC) of E or above. The energy rating will be determined during the property valuation.
The fundamental message remains unchanged whether you pursue a Buy-to-Let or Limited Company Mortgage. These options offer promising avenues for property investment and financial gain. However, understanding the risks involved is paramount. Conduct comprehensive research and stay attuned to market conditions. Equally crucial, engage with a mortgage adviser experienced in property investment.
At Connect Mortgages, we possess this knowledge. Our team of mortgage experts understands the intricacies of property investment. We are ready to guide you through your investment journey. We ensure informed decisions and optimise outcomes for your property ventures.
