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The Paragon Great Buy-To-Let Debate

What does 2015 hold for the UK Buy-to-Let market? Our latest blog post reveals the key points of discussion from Paragon’s Great Buy-to-Let Debate.

On Monday 2nd March 2015, the annual Great Buy-to-Let Debate took place in Westminster. The Landbay lending team attended the debate which saw market leaders and influencers on a panel chaired by John Wriglesworth.

The panellists:

Michael Balls, Professor of Urban & Property Economics, Henley Business School, University of Reading
Richard Dyson, Telegraph personal finance editor
Valerie Bannister, President, ARLA and Head of Lettings, Your Move
John Heron, MD, Paragon Mortgages
David Whittaker, MD, Landbay’s brokerage partner Mortgages for Business

Debate topics ranged from tenants’ rights, the link between interest rates and house price growth to the growth of the Private Rented Sector (PRS) itself. In the run up to the general election, the subject of Labour and Conservative BTL regulation proposals was raised, although opposition for Labour’s proposition appeared to be unanimous.

Both the panel and audience were in agreement that gross BTL lending would continue to rise in the near future. Other panellists were more optimistic, citing last year’s growth of 32%, but the majority of the audience supported David Whittaker’s grounded proposal of a 10-12% growth. Last year, gross BTL lending rose by 32% year-on-year to £27.4 million (CML).

The panel were wary of over-regulation of the sector. The point was made that fixed rents of 3 years would only lead landlords to start their rents higher in order to compensate for lack of capacity to grow. Rent caps would also put the size and quality of the PRS at stake as lower investment in the sector would put pressure on PRS supply.

As long as the lack of social housing continues, the need for investment in the PRS will grow. Landbay have recently conducted research showing that the PRS needs a minimum investment of £1.4 trillion by 2035 in order to support UK housing requirements. Families will suffer the most if neither the social housing nor the BTL markets are given sufficient government support.

One particularly interesting point from the audience was raised regarding disruptive technology; that tech will change the industry and lead the way in new product development. The number of products available to BTL borrowers has risen from 600 to 850 over the past year. However, among many in the industry, the complaint still stands that there is a distinct lack of innovation in products. Valerie Bannister focused on the need for flexibility and quality within the PRS. Lenders need to adapt products to meet the growing trend of longer term tenancies, without necessarily implementing further regulation.

As the debate drew to a close, David Whittaker reminded us that, as a sector, the PRS must remember that we are part of a wider industry. John Heron estimated that potential PRS tenure in the housing market over the next 5 years could reach 25% (PRS tenure is 19.5% today), whilst Richard Dyson focused on the politicisation of home ownership, both as a direct consequence of policy change and as an indirect result of changes in inheritance tax, for example.

Valerie Bannister remained positive that the PRS is losing its stigma. Nonetheless, the ARLA President remains cautious and warned the audience that it would be wrong for the regulators to meddle in the sector’s organic growth

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