May’s General Election is of course a significant potential speed bump for the housing market, not least because the outcome is truly unknown. Politics has certainly changed in the last decade and there is no foregone conclusion result as we had in election years throughout the 1980s under Margaret Thatcher or during Tony Blair’s New Labour victories of 1997, 2001 and 2005. 2015 is a completely different political environment and because of this we may see a pull back in housing activity leading up to, and beyond, the event itself until we have a clear understanding of the result.
Away from the General Election however there are reasons to be positive. Certainly from a mortgage perspective, lenders have kicked off the year with a strong appetite to lend. Significant drops in product pricing reflect this appetite and, for those who have strong levels of equity, the mortgage market presents a real opportunity to secure some historically-low rates. Add in Mark Carney’s recent comments that a continued fall in inflation could trigger future cuts to Bank Base Rate and we could see even greater rock-bottom product pricing in the months ahead.
The buy-to-let market ended 2014 strong and looks likely to continue in this vein with demand growing and lenders actively looking to secure more buy-to-let business. We have had a steady stream of new lenders announcing themselves in the buy-to-let market, such as Fleet Mortgages, with another two lenders, Pepper Homeloans and Foundation Homeloans showing their intention to lend in this sector. Gross lending levels are likely to grow significantly because it is not just the specialists that want a piece of the pie but also the mainstream lenders looking to up volumes.
There has also been some wild speculation that the buy-to-let market is going to see a huge influx of what we might call ‘silver landlords’ post-April this year. The reason for this is the new pension freedoms that were announced last year by the Chancellor and effectively mean that new pensioners (and perhaps in the future existing ones) will be able – should they wish – to drawdown their entire pension pot in cash to do with as they please. It should however be pointed out that only 25% of that pot would be tax-free and therefore this might temper many pensioners’ willingness to do this.
That said, there has been something of media frenzy around this opportunity and, if you read some of this as an agent, you might be forgiven for thinking that from April you will be receiving a steady stream of new landlord enquiries from those 55 years and over. The reality of this might be slightly different – undoubtedly there will be some new pensioners who will look to invest some of their pension pots in bricks and mortar because it represents a sound investment. However, whether this will be a flood of new pension age landlords is a moot point.
For a start, the average pension pot is approximately £25k which means that it is highly unlikely you’ll be using this to invest in property. For a start, with current prices your deposit levels might wipe the whole amount out and what are you going to live on then for the rest of your retirement? Those with much bigger pension pots might like to consider the property opportunity however we must not forget that being a landlord is not exactly ‘easy’ work and therefore many pensioners might look for other places to put their money.
That said, the private rental sector as a whole is only likely to grow. Recent research suggested that homeowners would be in a minority over the next 15 years which means the number of people renting will increase significantly. There is undoubtedly a growing demand for rental properties and ‘silver landlords’ could add to the landlord population in the coming years. As an agency business therefore, it will certainly pay to make yourself both the landlord’s and tenant’s friend – while professional and portfolio landlords should continue to thrive, those new to the sector will need plenty of hand-holding and education, and this is where you should be able to carve out a real niche with a quality service.
2015 might well be the year of the General Election, but it could also be the year of the landlord – regardless of their age. Agencies who can tap into this opportunity are likely to reap the rewards.
