Buy to Let

by Mark Johnston

It seems that as the lending criteria has tightened; the number of people able to buy property has shrunk, leaving a gap in the market which is being filled by the buy to let investor.

One of the reasons that buy to let investors have not been hit as hard by the mortgage market is that many property investors do not need a mortgage or have sufficient equity to put off sizeable deposits, this also puts them in strong bargaining positions.

Lower house prices, rising rents and improving mortgage deals seem to be tempting buy to let investors once more.

Like any investments, buy to let comes with no guarantees, but for those who have more faith in bricks and mortar than in stocks and shares, the future looks bright.

David Newes, director of LSL property services, suggests that “the signs are already clear that 2012 will be a strong year for buy to let investors”.

Some experts also believe that anyone thinking of investing in property should do so in the next 6 months, as the parlous state of the recovery means an interest rate hike is unlikely before mid 2012 and therefore mortgage rates will remain low.

The recovery in the buy to let market still remains small against the demand seen in both 2006 and 2007; however the strength of this market has surprised analysts given the turmoil in the second half of 2011 with the euro zone crisis and also with the UK economy remaining pitifully weak.

Figures from the Council of Mortgage Lenders (CML) showed that in 2010 a total of £9.7 billion was lent to buy to let investors, it also showed that this figure was surpassed in October 2011.

The ‘high end’ estate agent Savills figures showed a jump of 40% in the number of homes owned by buy to let landlords. These figures also showed that nearly 20% of all residential properties are now owned by property investors.

Data has also shown that recently searches for buy to let mortgages surged in December 2011, up to 3,874. Many believe that this indicates that those now searching are more serious about actually taking the plunge.

The fact that more people are now interested in buy to let as an investment may be due to the fact that the yield that can be earned from buy to let, which was bolstered by fast rising rents in both 2010 and 2011, far exceed the yield to be earned from any savings accounts.

Some financial commentators however have blamed first time buyer’s inability to get on to the property ladder on buy to let investors.

The claim that buy to let investors are forcing first time buyers out of the market has been dismissed by at least one leading industry figure.

Matthew wyles, group distribution director for the Nationwide building society, said “it was stricter lending criteria and the requirement for a larger deposit which was causing difficulties for first time buyers and not buy to let investors snapping up cheaper properties to rent out”.

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