Lack of mortgages and increase in buy to let investors leads to increase in private renting

Over the past few years the mortgage lending market in the UK has become increasingly subdued, and whilst the recession may now be over and the economy on its way to recovery many people are still struggling to get a mortgage loan unless they have a very sizeable deposit to put down. At the same time the number of buy to let investors is said to have increased, which means that there is a rising number of buy to let properties on the market.

A combination of these factors is said to be affecting the number of people that are in private rented accommodation, and according to recent reports the number of people that are privately renting is set to rise, as more and more private investors come on to the market, making it increasingly easy for people to get a private rent accommodation compared to social housing, which involves going onto a waiting list or bidding on properties through council websites via the Choice Based Lettings system.

A study was recently carried out by the Building and Social Housing Foundation, and the results of the study indicated that one in five households could be living in private rented accommodation by the end of the decade. The foundation believes that there is going to be a boom in the number of people that are living in private rented accommodation, and this will make up one fifth of households by the end of the decade in ten years time.

One industry official said: “This research shows significant changes are taking place in the UK housing system. More and more of us are becoming private renters – 1m households since 2005 – some of them through choice, but many because they have no other option.”

Tags: Private rented sector, uk, United Kingdom, buy-to-let, Renting, economics, finance, Financial economics

Flat rental prices come down whilst rents on larger properties rise

Recently released figures have indicated that there is currently a split in the property rental market when it comes to the amount of rent that tenants are being asked to pay. Read more

Tags: rental prices, rent, tale, larger properties, coming down

CML releases repossession figures

The Council of Mortgage Lenders released figures last week that showed the level of repossessions in the UK had increased by 50% in the first three months of this year compared to the first quarter of the previous year. The number of repossession is said to have soared to 12,800 in the first three months of the year, and this was up from 10,400 in the previous quarter and from 8,500 in the first three months of 2008. Read more

Tags: council of mortgage lenders, final three months, repossession numbers, buy-to-let, Mortgages, Lenders released figures

An increasing number of privately renting tenants are getting evicted

A recent report has shown that there has been a rise in the number of privately renting tenants that are being evicted from their rented homes, and this is causing concern amongst many industry officials. Read more

Tags: shelter, industry, buy-to-let, Business and Economy, home, Real estate

RICS states only rich can afford to be landlords

Officials from the Royal Institute of Chartered Surveyors have stated that in the current economic climate only the rich can afford to become landlords, with investment properties being made inaccessible to many people because of the high level of deposit that many lenders are now demanding.

According to reports the level of deposit required on buy to let properties has increased by 500% since 2002, with the average deposit needed now being around 30% of the property value, equating to an average of around £65,600.

In the first quarter of 2002, according to the report, only around 8% or an average £10,100 was needed to invest in a buy to let property. RICS officials state that the high level of deposit needed means that many potential buy to let purchasers have been put off or simply cannot afford to get their foot on to the buy to let ladder.

However, the Institute states that the situation could ease somewhat next year, with interest rates likely to fall and house prices likely to drop or remain stable. This could see an increase in the number of consumers deciding to invest in buy to let.

One economist from the Royal Institute of Chartered Surveyors stated: “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.”

Tom Smith
18th November 2007

Tags: investment, buy-to-let, surveyors, Mortgages, deposit, landlord, equity

Buy-to-let lending continues to thrive

Buy-to-let mortgage lending is booming, in spite of widespread concern about the state of the market.

With the Royal Institution of Chartered Surveyors (RICS) warning that house prices are falling at their fastest rate for two years yesterday, many believe that the buy-to-let sector will contract.

However, new data published this week suggests that many investors continue to believe that buy-to-let remains a good deal.

New figures from the Council of Mortgage Lenders (CML) showed that £7.8 billion was taken out in loans under their ‘other lending’ category in August – of which buy-to-let is a major component.

The sum makes up almost 25 per cent of the £34 billion borrowed that month, and is 37 per cent up on the figure for the previous month.

The CML said: “Total lending has been buoyed by a strong buy-to-let market.

“[Other lending] covers buy-to-let which has continued to be underpinned by house price increases, tenant demand, rent increases and landlords’ willingness to take long-term investment decisions.”

In the same period, the CML’s figure showed that borrowing for new purchases fell by 11 per cent on the previous month, while remortgaging borrowing fell by 12 per cent.

Tags: GBP, short, yesterday, buy-to-let, month, Financial economics, cml, week

Market volatility increases attractiveness of buy-to-let

The recent fluctuations in the UK stock markets have caused a lot of financial concerns among investors.

Originally caused by the meltdown of the US sub-prime mortgage sector, the current turbulence in credit markets might lead some to look elsewhere to grow their assets.

Mortgage Trust commented today that some landlords are finding safer bets in the buy-to-let market.

According to their research, 32 per cent of new landlords have cited control over their investment was a major factor behind their decision to enter the market.

This represents a four per cent rise over the same question asked by the company in January.

Managing director at Mortgage Trust John Heron commented: “When investing in stocks and shares, your only option if you don’t like the way an investment in a fund or company is performing, is to sell.

“With buy-to-let, landlords are in the driving seat. As financial markets become increasingly volatile, this level of control will become more attractive to investors.”

Mr Heron also claimed that the spiralling base rate of interest – which the Bank of England has raised five times in the last year – had also led investors to become “increasingly risk averse”.

Tags: way, fund, United Kingdom, stocks and shares, director, Trust, bank of england, buy-to-let

Buy-to-let harming first-time buyer chances

First-time buyers are losing out due to the growing buy-to-let market, according to Firstrung, a mortgage company specialising in first-time buyer deals.

In their estimation, up to one million properties have been lost to the first-time buyer market because of buy-to-let purchasers, and the competition between the markets has resulted in £50,000 price rises over the last four years.

Firstrung released their statement in response to a comment by Professor Michael Ball of the University of Reading at a conference held by the Association of Residential Letting Agents (Arla).

In his speech to the Arla annual conference on February 7th, Professor Ball “dismissed” the idea that buy-to-let investors force first-time buyers out of the market, and said: “Buy-to-let has increased the size of the private rented sector and extended the alternatives to both owner-occupation and social housing.

“It has assisted in the regeneration of inner city neighbourhoods and in some areas it has helped to revive the housing market.”

Responding to the comments, Paul Holmes, operations director of Firstrung issued some stinging criticism.

“In recent years amateur buy-to-let investors have had a more detrimental effect on first-time buyer opportunities than any other purchaser,” he said.

“First-time buyers would be looking at average prices circa £100,000 to get on the first-rung, as opposed to the average entry level price of £150,000, if buy-to-let had not taken such a grip of the imagination of the British public.”

Tags: buy-to-let, first-time buyer chances, first-time buyer opportunities, first time buyer, Professor Michael Ball, Business Finance, Residential, detrimental effect

Buy-to-let buyers not causing price rises

A leading property expert says the popular belief that buy-to-let investors are pricing first-time buyers out of the housing market is unfounded.

Michael Ball, professor of urban and property economics at the University of Reading Business School, said investors are not to blame.

He was speaking at the annual conference of the Association of Residential Letting Agents (Arla) and said that there is only one way in which to bring house prices down to a more attainable level.

“It is to build more houses that people actually want to live in and in places where they want to live,” he told the conference.

Mr Ball was keen to emphasise that he feels those considering getting a buy-to-let mortgage are benefiting the market, and society as a whole, and should be encouraged to go through with their plans.

“Without buy-to-let, the private rented sector would probably be much smaller. The quitters would have exceeded new entrants,” he said.

“It enables households to build up their own equity and, although tenants do not share in capital gains directly, they do so through lower rents and lower risk.

“They can do this while living in good standard accommodation, as competition in the rental market is now greater,” added the professor.

Buy-to-let properties account for between five and six per cent of housing in the UK and is a bigger industry than all of the country’s pubs, hotels and restaurants combined.

Tags: risk, lower rents, housing, while, buy-to-let, annual conference, Letting agent