Kent Reliance warns of first time buyers 'lost decade'

Posted on Monday, June 18, 2018

Growth in the rental sector has slowed but it is unlikely to mean it has become any more affordable for first-time buyers to get on the property ladder, Kent Reliance claims.

The lender warns in its latest Buy-to-Let Britain report that first-time buyers are more likely to be suffering rather than benefiting from Government clampdowns on the private rental sector (PRS,) warning of another lost decade for those looking to get on the property ladder.

The report claims that while there were 27,200 fewer mortgage approvals for landlords last year, this hasn’t helped first-time buyers as lending figures to this cohort are down compared with a decade ago.

There were just 23,500 more home loans for first-time buyers last year at 363,100, Kent Reliance said, which is 94,000 fewer than the average seen per year prior to the 2008 credit crunch.

The report warns that there is already a backlog from 2008 and says higher rents caused by extra Stamp Duty and the end of mortgage interest relief on buy-to-let properties will just mean it takes longer for people to save enough to get on the property ladder.

Kent Reliance said buy-to-let was wrongly seen as binary, with landlords frequently seen as taking the properties that first-time buyers would otherwise purchase.

It said: “If this were the case, we would expect the number of first-time buyers last year to have risen by far more than the amount that house purchases fell among landlords.

“This argument does not account for the difficulties first-time buyers have in entering the market.

“Criteria have become far more restrictive, and tighter regulation since the Mortgage Market Review has made it more difficult to secure a mortgage.

“Meanwhile, a lack of building has inflated house prices, accentuating first-time buyers’ affordability issues. In reality, landlords provide a safety net for those unable to buy. Deterring supply in the private rental sector will simply increase competition, make renting more expensive and reduce tenants’ ability to save for their deposits.”

The lender estimated that the number of PRS households had grown by 3% annually in the first quarter, slower than the average rate of 5% over the past decade.

Kent Reliance said this slowdown – attributed to landlords acclimatising to buy-to-let tax changes – meant the value of the private rental sector was flat on the last quarter at £1.4trn, but still up 5.5% annually.

There were also signs of rental growth slowing. Average rents were up just 1% annually to £898 per month in the first quarter of 2018 compared with a 3% return two years ago.

A survey of landlords in the report also revealed a fine margin between those adding and disposing of properties. The poll found that while 9% increased their portfolios in the first quarter of 2018, another 8% sold properties. The report warns supply may fall further, with 4% more landlords expecting to reduce their portfolios rather than expand.

Landlords are still trying to get around the scaling back of mortgage interest relief, though, with the proportion of mortgage applications through limited companies in the first quarter of 2018 reaching 72%, double the rate seen two years ago.

Andy Golding, chief executive of OneSavings Bank, which trades under the Kent Reliance brand, said: “Landlords were left reeling after the introduction of tighter regulation and higher taxes, while the spectre of Brexit is already weighing on the housing market. This has naturally deterred investment into the private rented sector, especially from amateur speculators.

“Political opinion may be set against the PRS, but without it, the housing crisis would be deeper still. First-time buyer numbers, despite recent fanfare, are a long way from pre-recession levels, and with household numbers growing, and new housing starts inadequate, it is the PRS that will continue to pick up the slack. Policy should recognise that, and support growth in supply across all tenures.

“A housing market with dwindling supply of rental accommodation yet growing demand would, without a significant rise in affordable housing, provide the worst of all worlds for tenants: higher rents, with less choice and security, hampering their ability to save to buy a home.”