Hiten Ganatra is managing director of Visionary Finance
Despite the many obstacles from central and local government that have been designed to limit the ambitions and growth of landlords and property investors, buy-to-let mortgage borrowing has recently reached a record high.
Thus putting paid to predictions that there would be a mass exodus of landlords in the face of changes to tax and falling yields.
According to recent statistics from UK Finance, there were 2.02 million outstanding buy-to-let mortgages at the end of June, up from 1.65 million at the end of 2014.
Most new buy-to-let loans approved by lenders in the first three months of this year were for landlords remortgaging, while 28,500 mortgages of the 67,500 approved were for new properties.
However, as we start the economic recovery after the pandemic, there may be increased opportunities for the savvy investor following the recent extension of permitted development rights (PDR) in England.
PDR for residential conversion has applied since 2013 to some commercial buildings, although it has now been significantly expanded to more types of property and in some cases its demolition and replacement as well as conversion.
So what’s the size of the opportunity?
According to data from the British Retail Consortium, around one in seven shops in England, Scotland and Wales were empty as of March 2021. Overall vacancy rates of shops increased to 14.1% in the first three months of 2021 – this was up from 13.7% in the previous quarter.
Even before COVID, 25-40% of retail space was “no longer viable or needed”, the Centre for Policy Studies said in a report published within the last month “Yet councils are doing little to ensure these vacant properties are being converted or redesignated.”
Nimbus Maps, which advises developers, said that around 31,000 properties and more than eight million square metres of floor space could be converted into 135,000 two-bedroom flats.
The report said that the buildings combined value would almost double from £23bn with commercial use to £43bn as residential.
There is obvious opposition to the reform mostly from planners, but also from architects warning about poor design. The government though has said that new PDR flats will have to have natural daylight and meet national space standards, but many argue that that really doesn’t go far enough.
At the same time of this reform coming into effect, we are seeing the largest choice of lenders and products in the buy-to-let market than ever before, which is resulting in low mortgage rates and more options for landlords, especially those with larger portfolios in limited company arrangements.
The same is true in the short-term lending / bridging finance sector with lenders falling over themselves to lend resulting in attractive rates, including for those investors seeking to refurbish properties.
Despite the concerns on PDR from some quarters, it is clear that a once in a generation opportunity may be presenting itself to developers and property investors and with interest rates at their lowest and lenders competing amongst themselves, the stars may be aligning – in my experience though, such windows rarely stay open for long, so it may be now or never…