Buy-to-let ‘out of reach’
November 9, 2007 by admin
Filed under News, News-Mortgages
The buy-to-let market is now out of reach of the ordinary investor, due to spiralling prices, it was claimed this week. 
The Royal Institution of Chartered Surveyors (RICS) has found that the average deposit a would-be landlord needs to put down to get hold of a rental property is £65,000, or 30 per cent of the property’s value.
In early 2002, this figure was just £10,100.
The increase has been brought about by factors common across all parts of the housing market, such as high interest rates and contracting supply, but also by factors specific to buy-to-let.
In particular, rental cover ratios for mortgages are high, with most landlords being asked to ensure that rental yields on their properties will cover 125 per cent of the mortgage before a lender will consider handing the money over.
Senior economist at RICS David Stubbs said: “It takes more capital than ever to set up a buy-to-let investment. Would-be investors who have missed out on the impressive returns of previous years are now finding the hurdles to property investment are higher than they imagined.
“However, existing landlords should be able to use the equity in their past investment properties to fund the deposit needed for new ones, and this should ensure that demand from the buy-to-let sector does not dry up entirely.”
