Buy-to-Let figures highlight nervous mood among landlord-entrepreneurs

Buy-to-Let figures highlight nervous mood among landlord-entrepreneurs

Analysis

Chart 1 below shows the gross value of new residential loans, as well as the proportion of residential loans going into the buy-to-let market.

These flows are focused on the smaller, individual investor and so provide an insight into confidence in the PRS segment served by RLA members.

Chart 1: Residential loans & BTL lending

  1. Out of the nine years in the Chart below, Quarter 3 lending volumes have been the highest of the year on seven occasions. This is the case – so far- in 2019.
  2. Although lending volumes were higher in 2019 Q1 with the same quarter in 2018, for Q2 and Q3, volumes in 2019 were lower than the  2018 equivalents. Note these figures are unadjusted for inflation.
  3. Because lending volumes rise in the third quarter, it is not surprising to see the overall proportion of advances in the BTL market dip. This has happened in 2019 too with the proportion of new advances being for BTL purposes falling from 13.2% in Q2 to 12.3% in Q3.
  4. However, this “dip” is more pronounced than seasonality alone would imply – there is a clear downward trend as identified on our Observatory page.
  5. The proportion of loans for BTL in Q3 2019 is up slightly on Q3 for 2018 (12.3% c/w 12.1%) and overall lending volumes have fallen slightly (£73,306m vs £73,473m in Q3 2018). At best therefore, one could say the BTL market is holding constant.
  6. On the upside, we have identifed above the Q3 proportion of BTL lending is slightly higher in 2019 than 2018. This is the first time the proportion has risen since Q3 2015 (when the proportion of BTL lending rose to 16.1% from 14.5% in Q3 2014) – Again, it should be remembered that this current modest rise is at a time of stalling volumes when comparing quarters.

This post was authored by Nick Clay of the RLA. The views, analysis and interpretation of the data are his and not necessarily those of the RLA. 

Note that the data presented here is subject to revision. Such revisions may render the analysis null and void in the future. 

Nick Clay

Nick Clay MSc, PgDip is the lead Research Officer for the NRLA, having previously worked for the Residential Landlords Association (RLA). Before joining the RLA Nick had a successful career working for various consultancy companies, Whitehall and academia. He has specialised in advising clients on business support, promoting entrepreneurship and evaluating labour market initiatives. Nick worked as a Senior Economist for a large multi-national consultancy advising Whitehall and City Regions on major infrastructure projects.