Abstract
UK consumers have long been renowned for their strong affinity to property ownership. Indeed, these home ownership aspirations have led to a sharp increase in the overall level of owner-occupation over the last three decades. As a result, the household sector now holds almost half of their total assets in bricks and mortar. Furthermore, the booming housing market of the past 12 years has encouraged an increasing number of people to sink even more of their money into property investments.
This vividly highlights the fact that a significant proportion of the consumer base do clearly perceive property to be a particularly effective and secure way of saving for their future. However, a key question now is whether this confidence will evaporate as the housing sector enters an anticipated downturn in its fortunes, or whether they will retain their faith in the long-term value of property investments.
This report provides an assessment of the current conditions within the property investment sector. It analyses the latest market data, considers the prospects for future growth and reports industry views on a range of salient issues. In addition, it provides analysis of Mintel' s independently commissioned consumer research, which identifies the proportion of adults who own property-based investments and establishes the potential for future demand; considers the impact of the credit crunch and negative economic backdrop on consumers' desire to invest in property; and seeks to gain a broader insight into consumer attitudes
Key report themes:
- Mintel' s research found that almost one in ten consumers now hold some kind of property-based investment.
- Buy-to-let is the most common way to invest in property, with the research implying that around 2 million consumers now own an investment property that they rent out.
- There was also evidence of strong latent demand, with one in six consumers declaring an interest in buying an investment property, over half of whom stated a strong intention to do so.
- Furthermore, the prospect of a housing market downturn seems unlikely to dampen this enthusiasm, with more than a quarter of consumers saying they would be tempted to invest in buy-to-let if property prices fell significantly.
- In addition, just over half of all consumers agreed that strong rental demand makes it a particularly good time for the buy-to-let sector.
- The research also found that an increasing proportion of consumers feel that renting a property is better value than buying, with one in ten now holding such a view, although the proportion actually preparing to sell up and move into the rented sector remains extremely low.
Table of Contents
- Issues in the Market
- Main findings of the research
- Abbreviations
- Market in Brief
- Property is the household sector' s main asset class
- A booming housing market has encouraged property investment
- Tenant demand is likely to increase in the coming years
- The buy-to-let sector has seen spectacular growth
- The property-based unit trust market has also grown significantly
- Trade perspective: The rationale behind buy-to-let remains compelling
- Mintel' s research findings: Investment portfolio
- Mintel' s research findings: Property as investment
- Mintel' s research findings: Future intentions and expectations
- Mintel' s research findings: Impact of the credit crunch
- Mintel' s research findings: Attitudes towards property investment
- Asset Ownership
- Key points
- Owner-occupation has risen sharply in the last three decades
- Figure 1: Proportion of households in England and Wales, by tenure, 1981-2007
- Property is the household sector' s main asset class...
- Figure 2: Composition of net wealth of the household sector, UK, 1987-2007
- ...but most people' s homes are not merely an investment
- Strengths and Weaknesses in the Market
- Strengths
- Weaknesses
- Competitive Context
- Key points
- Property is a unique proposition
- Pensions represent main competition
- Figure 3: Individual pension sales, 2001-07
- Cash ISA sales soar in 2007/08, but stocks and shares ISAs stagnate
- Figure 4: Amounts subscribed to ISA accounts, by cash and stocks and shares components, 1999/2000 to 2007/08
- Collective investment sales suffer
- Figure 5: Net retail sales of UK domiciled unit trusts/OEICs, 1998-2008
- The Property Market
- Key points
- The property market has enjoyed a decade-long boom
- Figure 6: Property transactions in England and Wales,1980-2007
- House prices have more than tripled in the last 12 years...
- Figure 7: UK standardised average house prices (seasonally adjusted) 1995-2008
- ...although activity in the housing market has now started to wane
- The length and severity of the downturn is now the key issue
- Property investors will need to adapt to this new environment
- Broader Market Environment
- Key points
- The long-term outlook remains positive for property investors
- A rise in the number of households will boost housing demand
- Figure 8: Total number and average size of households in the UK, 1991-2013
- The growth in one-person households is particularly positive
- Rising student population is also increasing tenant demand
- Figure 9: Number of Higher Education students in the UK, by level of study, 1980/81-2005/06
- Rising immigration has provided a boost to the rental sector
- Changing lifestyles are also influencing housing demand
- The number of housing starts is falling sharply
- Figure 10: House building: permanent dwellings started in the UK, by region, 2005/06-2007/08*
- Housing supply is failing to meet the increase in demand
- Internal Market Environment
- Key points
- The credit crunch is still impacting the mortgage market
- Liquidity shortages continue to plague the mortgage market
- The future path of interest rates will prove to be crucial
- Figure 11: Bank of England base rate, end of quarter, 1972-2008
- Returns on commercial property have slumped
- Average rental yields languish at relatively low levels...
- Figure 12: Average rental yields for England and Wales, monthly data, 2002-08
- ...but rental yields are now starting to rise
- Survey evidence suggests landlords' confidence remains high
- The Buy-to-Let Market
- Key points
- Specialist subsidiary brands dominate the buy-to-let market
- Figure 13: Leading providers in the buy-to-let mortgage market, 2007
- Buy-to-let loans outstanding totalled £120 billion at end of 2007
- Figure 14: Buy-to-let mortgages outstanding, 2000-07
- The buy-to-let sector accounted for 12% of advances in 2007
- Figure 15: Buy-to-let gross advances, 2000-07
- There is evidence that buy-to-let activity has started to wane
- Figure 16: Buy-to-let mortgage market, quarterly data, 2007 and 2008
- The level of arrears and possessions has started to rise
- Figure 17: Buy-to-let mortgages three ore more months in arrears, 2007 and 2008
- Indirect Property Investment
- Key points
- Property investors can utilise a number of investment vehicles
- The property-based unit trust market has grown significantly
- A wide array of providers promote a range of property funds
- Property schemes accounted for a fifth of unit trust sales in 2007...
- ...although performance has dipped in the last nine months
- The immediate outlook does not look particularly promising
- REITs provide a new opportunity for indirect investment
- There are strict limits on REIT eligibility
- Total market capitalisation of UK-based REITs is £21 billion
- Figure 18: UK-based REITs, July 2008
- It was hoped that REITs would help stimulate investment...
- ...but only 1% of consumers currently own a REIT
- Increased IFA awareness offers some hope for the future
- The Consumer -- Investment Portfolio
- Key points
- Survey background
- Property investment is still a relatively niche sector
- Figure 19: Investment ownership, May 2008
- One in seven ABs hold property-based investments
- Figure 20: Investment ownership, by gender, age, socio-economic group and age/socio-economic group, May 2008
- High earners are most likely to invest in property
- Figure 21: Investment ownership, by lifestage, Mintel' s Special Groups, working status, income and TV region, May 2008
- Almost one in six M&S customers own property investments
- Figure 22: Investment ownership, by technology users, commercial TV viewing, newspaper readership and supermarket used, May 2008
- High earners, ABs and 45-54s are prime buy-to-let investors
- Figure 23: Summary of property investor profiles, May 2008
- The Consumer -- Property as Investment
- Key points
- Consumers tend to favour the risk-averse savings route
- Figure 24: Preferred method of saving for the future, by gender, May 2008
- Men less risk-averse?
- The 25-34s are more likely to consider property investment
- Figure 25: Preferred method of saving for the future, by age, May 2008
- A fifth of C2s feel buy-to-let is a particularly good way to save
- Figure 26: Preferred method of saving for the future, by socio-economic group, May 2008
- Consumer enthusiasm for property appears to have waned
- Figure 27: Preferred method of saving for the future, 2007 and 2008
- Four in ten current property investors favour buy-to-let
- Figure 28: Preferred method of saving for the future, by investment ownership groups, May 2008
- The Consumer -- Future Intentions and Expectations
- Key points
- One in six consumers might buy an investment property
- Figure 29: ' Seriously considering buying an investment property in next five years' , May 2008The 18-24s are most inclined to purchase an investment property
- Figure 30: ' Seriously considering buying an investment property in next five years' , by gender, age, socio-economic group and age/socio-economic group, May 2008
- A third of the ABC1 pre-/no family group might buy a property
- Figure 31: ' Seriously considering buying an investment property in next five years' , by lifestage, Mintel' s Special Groups, working status, income and TV region, May 2008
- Over a third of property investors want to expand their portfolio
- Figure 32: ' Seriously considering buying an investment property in next five years' , by investment ownership groups, May 2008
- Fewer consumers are considering the purchase of a property
- Figure 33: ' Seriously considering buying an investment property in next five years' , 2007 and 2008
- A fifth of consumers feel it is time to exit the property market
- Figure 34: ' Now is a good time to get out of the property market' , May 2008
- More than a quarter of C2DE 18-34s are property pessimists
- Figure 35: ' Now is a good time to get out of the property market' , by gender, age, socio-economic group and age/socio-economic group, May 2008
- High earners are most optimistic about the property market
- Figure 36: ' Now is a good time to get out of the property market' , by lifestage, Mintel' s Special Groups, working status, income and TV region, May 2008
- A fifth of property investors feel it is a good time to exit the market
- Figure 37: ' Now is a good time to get out of the property market' , by investment ownership groups, May 2008
- Almost half of all consumers expect property prices to fall
- Figure 38: Property price expectations, May 2008
- Just under six in ten ABs think property prices will fall
- Figure 39: Property price expectations, by gender, age, socio-economic group and age/socio-economic group, May 2008
- Consumers are far more pessimistic now than a year ago
- Figure 40: Property price expectations, 2007 and 2008
- Half of all property investors expect house prices to fall
- Figure 41: Property price expectations, by investment ownership groups, May 2008
- Falling property prices will not deter all potential investors
- Figure 42: Property price expectations, by agreement with ' Seriously considering buying an investment property in next five years' , May 2008
- The Consumer -- Impact of the Credit Crunch
- Key points
- Most property investors have retained faith in the market
- Figure 43: ' Only an idiot would invest in property at the moment' , May 2008
- Relatively few ABC1 35-54s doubt the wisdom of property investment
- Figure 44: ' Only an idiot would invest in property at the moment' , by gender, age, socio-economic group and age/socio-economic group, May 2008
- A third of low earners question the sanity of property investors
- Figure 45: ' Only an idiot would invest in property at the moment' , by lifestage, working status, income and TV region, May 2008
- Lower property prices would tempt some buy-to-let investors
- Figure 46: ' Would be tempted to invest in buy-to-let if property prices fell significantly' , May 2008
- The 18-34s are most likely to be tempted by falling prices
- Figure 47: ' Would be tempted to invest in buy-to-let if property prices fell significantly' , by gender, age, socio-economic group and age/socio-economic group, May 2008
- Lower property prices would tempt almost a third of Londoners
- Figure 48: ' Would be tempted to invest in buy-to-let if property prices fell significantly' , by lifestage, working status, income and TV region, May 2008
- Half of all consumers feel strong tenant demand will boost buy-to-let
- Figure 49: ' With more people looking to rent, it' s a good time for buy-to-let properties' , May 2008
- Six in ten 18-34s feel rental demand will support buy-to-let
- Figure 50: ' With more people looking to rent, it' s a good time for buy-to-let properties' , by gender, age, socio-economic group and age/socio-economic group, May 2008
- A high proportion of Scots feel tenant demand will aid buy-to-let
- Figure 51: ' With more people looking to rent, it' s a good time for buy-to-let properties' , by lifestage, working status, income and TV region, May 2008
- Key Targets and Future Prospects
- Key points
- Assessing consumer sentiment
- Methodology
- Positive sentiment has declined
- Figure 58: Range of propensity to invest, May 2008Property investment is less appealing for the over 55s
- Figure 59: Demographic breakdown of target groups, May 2008
- Background demographics unfavourable for future growth
- Figure 60: Impact of demographic changes on potential consumer base, 2008 and 2013
