Invest and Fund predicts “exodus” of London BTL landlords
Invest and Fund has predicted that there will be an “exodus” of buy-to-let landlords from the Greater London area as institutional investors and private equity funds move in.
The peer-to-peer property lender noted that house price inflation is finally starting to cool, but added that the prime central London property market “has been considered a bit of an island on its own, seemingly subject to its own gravitational laws”.
A recent report from the Guardian suggested that landlords sold 153,000 properties in 2021-22 – 8.5 per cent more than initially estimated. Invest and Fund pointed out that the barrier to entry in buy-to-let mortgages is seemingly still pricing and rental coverage, both of which are currently in flux.
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“At these rates, yes, landlords get the asset’s price appreciation over time, but the margins are becoming problematic regarding cash flow, the selling point essentially,” Invest and Fund wrote in a blog post to investors.
“Looking at the numbers of fixed-rate buy-to-let mortgages that are due to expire in the latter half of this year, estimated at over two million, it could just be the beginning of the exodus.”
The P2P lender went on to predict that London’s buy-to-let market could be targeted by institutional investors and private equity funds, mirroring what has already been happening in the US.
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“The wealthy investors on the positive side of the inflationary situation, the debt holders, seemingly still have a gargantuan lust for premium-grade assets in the capital,” the platform said.
“[It is our] belief that we will see an increase in private equity and institutional investment in the residential property market, and where we get that notion from is where we get all our trends from in the U.K. We look to the west.”
In the US, Wall Street institutional investors currently own approximately five per cent of the supply of rental properties. But according to CNBC analysts at the current acquisition rate, they will own or control 40 per cent of the supply by 2030.
“The profits generated from these acquisitions are recycled into build-to-rent schemes, consolidating their position as what will become the great American landlord,” said Invest and Fund.
“Vast amounts of capital are finding their way into the market through specialist businesses set up to be conduits. On the surface, at least, the conditions are present here to encourage the same strategy and behaviours.”
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