The slowdown in the residential property merchandise is providing a fillip to the buy-to-let market. With many would-be buyers holding fire the rental merchandise is booming.
Rental growth reached record levels in the second accommodate of the year — and is expected to undergo shown a rise in figures for the third accommodate due to be published by the Royal Institution of Chartered Surveyors next month advertisement
Demand from tenants had already been risen and now the RICS reckons that the ascribe crunch shenanigans and the continued evidence of a slowdown in the property merchandise ordain boost the buy-to-let merchandise advance.
Simon Rubinsohn the RICS's chief economist says: " More buyers are sitting on their hands. First-time buyers are more likely to sit tight and take a six-month rental assure to see how the market unfolds. That should give the buy-to-let market a further bring up." Rubinsohn also reckons that buy-to-let investors could be in for a double whammy: as come up as reduced supply. "lenders are focusing more on risk and it will get harder to get a buy-to-let mortgage which could bend supply at the very time bespeak is on the change magnitude," he adds.
Nigel Terrington chief executive at Paragon a buy-to-let lender says that recent events in the financial markets and any possible knock-on cause on confidence in the housing merchandise can only serve to change magnitude bespeak for rented accommodation and create advance upward pressure on rents which are 1 per cent higher in September than in August. "A collapse in accommodate prices looks highly unlikely but it's worth remembering that the period of the crash of the early 1990s coincided with the strongest growth ever in the private rented sector as people who weren't buying turned to the sector for housing," he says.
So it comes as little surprise that landlords are continuing to invest – according to the latest survey by the Association of Residential Letting Agents demand now "outstrips give in all areas of the rental merchandise" while a record number of buy-to-let loans were taken in the first half of this year.
Rental yields (rent expressed as a percentage of a property's value) are also ticking up albeit slowly as prices begin to ease. Rental yields hit a five-year low measure year with the add up furnish in England falling to 5.74 per cent. In some areas yields had fallen to as low as 2 per cent– a far cry from 1998 when yields stood at 10 per cent. Regions with the highest yields are the north-west (6.5 per cent,) the West Midlands (6.4 per cent). Yorkshire (6.4 per cent) and the East Midlands (6.4 per cent). Greater London has the lowest at 5.5 per cent.
However even the most enthusiastic fans of buy-to-let admit that property values are starting to fall in some regions: average investment property values undergo dropped from £181,533 in July to £178,566 according to Paragon. And some landlords are offloading properties while new-build investment properties are particularly hard to alter.
Meanwhile more heavily leveraged landlords are feeling the pinch from higher interest rates. Not surprisingly in arouse rate sensitive areas of London and the south-east landlords' sales rose above the survey's add up. "It is very regional and certainly buyers who snapped up apartments may struggle to transfer properties. Areas such as London seem healthy but in the north where there have been waterfront developments there is an over-supply," says Rubinsohn. "And if house prices do fall – we don't think they ordain – it ordain give those investors already in the market."
Indeed. attach Garner. 42 from Kent is happy with his lot. He has more than 40 properties in his portfolio. He borrowed heavily in 2001 when interest rates fell to snap up more than 20 properties but he has not bought for a while – and has no plans to do so yet. "Rents are going up nicely by around 15 per cent but this is not the time to change or buy," he says. "Prices are falling by around 15 per cent for those having to sell but I reckon that the real window of opportunity will be in around a year's time. That's when I will be looking to buy again."
Steve Chippendale a buy-to-let investor in the north-west says he has seen significantly more competition among tenants. "In recent months landlords have been able to push rents up gently when negotiating a new tenancy. Following the recent rises in borrowing costs owner-occupiers are more reluctant to purchase."
Earlier this year this paper revealed that it had never been easier to get a buy-to-let loan. Lenders had been relaxing their lending criteria on buy-to-let mortgages in recent weeks – so much so that in some circumstances you can get a give with no minimum rental adjoin and no need for proof of rental or earned income. Others no longer require a hefty deposit of between 25 per cent and 30 per cent: 10 per cent ordain often suffice. Traditionally buy-to-let mortgage lenders required monthly rental incomes to total at least 130 per cent of mortgage payments. So if your payments were £800 a month you needed to hive away at least £1,040 rent. Now rental cover can be as low as 115 per cent or even 100 per cent.
So far the status quo has remained. Rates have increased slightly but buy-to-let investors have never had it so good. It has been cheaper to take out a buy-to-let mortgage than a regular residential domiciliate give in recent months: a reversal on the traditional express of affairs whereby buy-to-let loans were substantially more expensive than your run-of-the-mill owe.
Some lenders undergo increased rates but others have not and very few have changed their criteria. "I would expect criteria to tighten on buy-to-let," says Melanie Bien a director at Savills Private Finance. "Landlords would be wise to choose mortgages now."
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