The Intermediary – July 2026 - Flipbook - Page 41
BUY-TO-LET
Opinion
No longer a
single entity
T
he private rented sector
(PRS) is frequently
discussed as if it were
a single, homogenous
market. Commentators
speak of yield or “the
landlord exodus” as though these
trends apply uniformly across
the country.
The reality is that the UK buy-tolet (BTL) market has fractured. It is
now a complex assembly of distinct
micro-markets defined by geography,
tenure type and financing structures.
As all lenders know, treating it as
a single entity is no longer a viable
underwriting strategy.
This fragmentation is most visible
in the shiing profile of property
ownership. The traditional model of
the amateur landlord with a single
investment property is in structural
decline. According to Savills’ report
‘Beyond Buy to Let: Where next for
the UK private rented sector’, between
2018 and 2024, the share of homes
owned by landlords with just one
property halved from 40% to 20%.
Over the same period, the average
number of properties per mortgaged
landlord grew from 3.2 to 4.5. The
market is consolidating into the
hands of professional portfolio
landlords who operate with different
risk profiles.
This professionalisation is
inextricably linked to how the
sector is financed. The use of
corporate structures has accelerated
dramatically in response to tax
changes and interest rate pressures.
The Savills report found that in
2023, some 73% of landlords intended
to purchase their next property
within a limited company structure.
This shi changes the nature of the
underwriting risk.
Assessing a limited company
application requires a deeper
understanding of corporate financial
health, director guarantees,
and portfolio-level stress testing
than a traditional individual
application. The data required to
make a confident lending decision is
fundamentally different.
Geography complexity
The concept of a national average
rental yield is becoming increasingly
meaningless. While the average UK
gross rental yield was 7.18% in the
final quarter of 2025, according to
UK Finance data, this figure obscures
enormous regional divergence.
Investors are increasingly looking
beyond traditional southern
strongholds to northern and regional
cities where yields are significantly
higher. Analysis compiled by Property
Investments UK and, separately,
the National Residential Landlords
Association (NRLA) suggests that
Southampton, for example, is
currently generating yields of 9.0%.
Cities such as Manchester and Leeds
continue to offer strong returns
compared to the compressed yields of
London and the South East.
This regional yield divergence
changes the risk profile of the asset.
A high-yield property in a northern
urban centre may carry different void
risks, maintenance expectations,
and capital appreciation prospects
than a lower-yield property in the
Home Counties.
Lenders need granular, localised
data to understand whether a specific
property in a specific postcode
represents a sustainable long-term
security. Relying on regional averages
leaves lenders exposed to hidden risks.
Property proposition
Tenure type is the final piece of the
fragmentation puzzle. As landlords
seek to maximise returns in a higherrate environment, there has been a
noticeable shi towards more complex
property types, particularly houses in
multiple occupation (HMOs).
The HMO market is now valued at
an estimated £78bn, driven by rising
STEVE GOODALL
is chief executive at e.surv
demand for shared living and
the higher yields these properties
can generate
HMOs represent a significantly
different underwriting proposition to
a standard single-family buy-to-let.
They are subject to stringent local
authority licensing requirements and
greater regulatory scrutiny. Valuing a
HMO requires specific expertise and
access to robust comparable data.
Underwriting differences
The convergence of these three
factors – geography, tenure
type, and corporate financing –
means that the data required to
underwrite a buy-to-let mortgage has
expanded exponentially.
A lender cannot assess a limited
company HMO application in
Newcastle using the same data and
risk models it uses for an individual
single-family application in Surrey.
To navigate this fragmented market
safely, lenders need access to dynamic,
highly granular property intelligence.
This means moving beyond static
valuations to incorporate real-time
data on local rental demand, licensing
registers and portfolio-level exposure.
It requires valuation partners who
understand the subtle differences
between micro-markets and who can
provide the context necessary to make
informed lending decisions.
The buy-to-let market is not
shrinking, it is evolving. It is
becoming more professional, more
complex, and more reliant on
specialised property types. Lenders
that recognise this fragmentation
and adapt their underwriting data
requirements accordingly will be wellpositioned to support the professional
landlords who are driving the
sector forward. ●
July 2026 | The Intermediary
39
