Benjamin Toms, RBC Capital Markets European Banks Analyst. Discusses the recent turn in the housing market and effects of rising remortgaging costs on the Buy to let market. In this conversation Ben explores what this means for Investors, corporates and the wider population.
Transcripts
Peter Dawkins:
m. Ben has been with us since:
Ben joined us from Barclays, and prior to that, worked with Deloitte where he qualified as an accountant. Firstly, I just wanted to thank you again for your time today. And we are delighted to have you as our speaker as I really do feel that the subject matter for today's chat is the most topical that it's been in years, and that's the buy-to-let market. I know you've written on this topic extensively over the past year. So I think it's best for us to just get straight into it and discuss really to start off with, what topics have been the key focus areas for your clients over the past few months?
Benjamin Toms:
et quality. If you go back to:
Peter Dawkins:
u've painting that picture of:
Benjamin Toms:
ly speaking, we do think that:
Peter Dawkins:
wth, vital net loan growth in:
Benjamin Toms:
et stock in the UK to grow in:
Peter Dawkins:
Okay, that's great. I think if we shift gears here slightly, it's been very difficult to avoid mentions of higher interest rates, higher mortgage rates, higher mortgage costs in the media, and so I think a lot of us have been thinking about that impact on borrowers. What will be the ultimate impact on landlords in this kind of environment?
Benjamin Toms:
ho have a mortgage [inaudible:
Peter Dawkins:
Well, and I think that's a great thing in theory, to what extent do you actually think landlords will actually be able to pass along higher mortgage costs to their renters, just given everything you just mentioned about cost of living and energy costs and the wallet being hit in so many different directions at once?
Benjamin Toms:
Well, actually it's interesting. The supply and demand economics of rental pricing are currently very much in favor of landlords and of higher rents. Over time, we can see there's a correlation between high rental levels and wage growth, and we're currently seeing significant upwards pressure in that area. And also the rental market tends to be quite countercyclical, and we're seeing currently that there's demand for rental properties growing from first time buyers really struggling to get into the market. Additionally, there's also a structural shortage of rental properties, and that's following years and years of outflows from the sector. That means your only real options as a renter are either to pay the higher rent, downgrade your property, or move back in with your parents. Now affordability will become an issue at a certain point, and it will bite, but we think there's room for much higher rents before we reach that juncture.
Peter Dawkins:
That's interesting because it does really seem like there's an emerging pressure point on both landlords and the tenants, but if you do say there's room to grow, how far do you think rental yields can go for buy-to-let landlords in this kind of environment?
Benjamin Toms:
se price movements. So whilst:
Peter Dawkins:
very tumultuous and impactful:
Speaker 3:
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