Buy-to-let property value increases

According to the Nationwide House Price data, the value of the average house rose 0.4 percent in October.  While the portfolios of the average buy-to-let investor will have increased in the past six months, the figure shows the rate of increase slowing.

Growth in September had been 0.9 percent, while July and August both saw increases of 1.4 percent, representing the expected seasonal fluctuation.

As Nationwide's Chief Economist, Martin Gauber, states: “A moderation in the rate of house price inflation was to be expected, as the very strong monthly increases seen over the summer months were unlikely to be sustainable over the long run."

The value of property has fallen 13.1 percent since October 2007, however the current average house price of £162,038 represents an increase of 4.6 percent since January 2009.

A slow recovery of the market may be a blessing for some buy-to-let landlords as the Bank of England continues to hold low interest rates.

Gauver continues: “Preliminary GDP [Gross Domestic Product] figures released by the Office of National Statistics showed that the UK remained in recession during the third quarter of 2009, defying widespread expectations that the economy had begun growing again over the period. The surprisingly poor figures have mixed implications for the housing market.

“On the one hand, a deeper and longer recession implies higher levels of unemployment and a longer period of subdued wages, both of which will act as constraints on the housing market’s recovery. Given the poor labour market situation implied by the economy’s ongoing weakness, it is difficult to imagine the housing market returning to the buoyant levels of activity and price inflation that prevailed earlier in the decade.

“On the other hand, the figures mean that interest rates are likely to remain at or near their current record lows for well into next year. As a result, mortgage affordability will remain relatively favourable for both new and existing borrowers."

Stephen Ludlow, Director of ludlowthompson said: “It is now possible for investors with a substantial cash deposit to secure a buy-to-let mortgage with an interest rate as low as 3.2%. This difference between the yield on the property and the interest payments is providing investors with a good, regular income on their investment.”