New research from Rely, the specialist buy to let lender from OSB Group, points to a structural change in the UK landlord population that will reshape the buy to let finance market over the next decade.
Rely’s Next Gen Landlords research, conducted with demographic consultancy Trajectory, shows a new type of buy to let borrower emerging. They have a different route into the sector, a different financial profile and a different view of property ownership from the generation they will replace.
Today, Baby Boomers and Generation X account for 54% of landlords. Within a decade, that figure is expected to fall to 37%, while Millennials will make up 44% of the market and Gen Z 18%. The private rented sector itself remains a significant part of the housing market, housing around one in five UK households. What changes is the profile of the people running it.
The incoming cohort will also be more diverse. Ethnic minority representation among landlords is set to rise from 11% to 23%, while the proportion of female landlords increases from 36% to 42%. That presents an opportunity for advisers and lenders to think carefully about how they engage with a broader range of clients than the market has traditionally served.
Perhaps the most significant finding for the intermediary market is how future landlords expect to enter buy to let.
More than a third (36%) of aspiring next generation landlords expect to inherit a property they can rent out, while a further 21% expect to inherit capital that will help fund a purchase.
For brokers, this is likely to change the advice journey. Clients entering the market through inheritance may need support that goes beyond arranging finance. They could be navigating decisions around an inherited property, considering whether to retain or sell an asset, or exploring how property fits into their longer-term financial plans.
Advice will become more closely linked to an individual’s circumstances, making it even more important to understand a client’s goals from the outset.
The next generation of landlords is expected to start with smaller portfolios than many of today’s landlords, building gradually over time rather than expanding rapidly in the early years.
At the same time, they appear to be taking a longer-term view of ownership. Half of future landlords plan to pass property on to family members when they eventually exit the sector, compared with 42% of current landlords.
That tells us something important about how this group sees property. Many are viewing it not simply as an investment, but as a long-term family asset.
As a result, the relationships they build with advisers and lenders at the start of their journey are likely to be particularly influential. The decisions made at entry point could shape borrowing and portfolio strategies for many years to come.
The emerging picture is of a landlord who is younger, more diverse, more likely to have entered through inheritance and focused on long-term ownership.
That creates new opportunities and challenges for advisers.
Case complexity is likely to increase as inheritance, taxation, ownership structures and borrowing requirements come together. Relationships may become longer-term and more consultative, while expertise across personal ownership, limited company structures and mixed portfolios will become even more valuable.
Technology will help support these changing needs. Faster processes and simpler applications remain important, particularly as customers increasingly expect efficient digital experiences. However, technology should complement expertise rather than replace it.
Many of the future cases brokers handle will require judgement, experience and meaningful conversations with clients. Those elements become more important when circumstances are more personal and ownership journeys more varied.
The research suggests tomorrow’s landlords are motivated by more than financial returns alone. Among current landlords, 82% describe their relationships with tenants as positive, while 55% report spending more time considering the tenant experience.
The next generation is likely to place similar value on operating successful and sustainable rental businesses. They will want advisers and lenders who understand both the financial and practical aspects of being a landlord.
The lenders and brokers best placed to succeed over the next decade will not simply be those with the fastest processes. They will be those able to combine technology, specialist expertise and strong relationships to support landlords throughout increasingly individual ownership journeys.
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