(Reuters) - OneSavings Bank (OSBO.L) said its focus on bigger, professional landlords helped drive a surge in buy-to-let applications during the first half of 2017, even as the broader market has lost its sheen for amateur landlords due to tax and regulatory changes.
OneSavings, one of the banks aiming to challenge Britain’s “Big 5” lenders, said last year that it had increased its focus on professional landlords and tightened lending criteria for financing smaller developments after the Brexit vote.
Traditionally 90 percent of Britain’s buy-to-let market has been owned by amateur investors, however a string of tax and regulatory changes announced last year have made the sector less attractive to such “dinner party” landlords, paving the way for larger institutions to grab market share.
“The buy-to-let market will in my opinion definitely shrink this year; where the market is falling away is the dinner party landlord because of the taxation changes and the additional stamp duty,” CEO Andy Golding told Reuters.
“I think that side of the market is put off and will slow the growth.”
Buy-to-let investors buy residential property, typically with a mortgage, with the aim of renting it out.
OneSavings on Thursday reported a 20 percent jump in first-half underlying pretax profit and said the impact of regulation would further shift buy-to-let activity towards its target market of larger landlords with 50-200 properties.
Consultant Knight Frank, which estimates the rental market will be worth 70 billion pounds by 2022, said recent tax policies affect traditional buy-to-let landlords, which could in turn create further opportunity for large-scale operators.
“When the big banks don’t play in that (professional landlords) space, actually that is an opportunity for us to take market share,” Golding added.
He said Kent-based OneSavings was focusing on housing outside of London, rather than funding new flats in and around the UK capital that has seen “some oversupply”.
OneSavings said its first-half loan book grew 10 percent, driven by a 26 percent jump in gross organic origination to 1.23 billion pounds.
Sky News in July reported OneSavings is interested in buying some of Bradford & Bingley’s mortgage loans.
Golding said the lender would be interested in bidding for mortgage portfolios that met its risk and reward hurdles.
Reporting by Noor Zainab Hussain and Esha Vaish in Bengaluru, Editing by Lawrence White