Perfect conditions for buy-to-let
- 29th January 2008
- Buy-To-Let Property News
Economic uncertainty combined with interest rate cuts is creating the perfect conditions for buy-to-let investors.
The one issue that has restrained rental growth for buy-to-let investors has been the flow of renters into the first-time buyers market. Until now this flow has only been interrupted by spikes in interest rate cuts which have also acted as a double edged sword by increasing buy-to-let investors’ borrowing costs.
However, recent research from the Council of Mortgage Lenders reveals that affordability for first time buyers is at its lowest level since 1991 and the number of loans issued to first time buyers has fallen from 36,700 in November 2006 to 28,400 in November 2007.
Stephen Ludlow, director of ludlowthompson.com believes this could mean that first time buyers will have more problems than ever getting on the property ladder and consequently remain in the rental market longer.
Mr Ludlow says: “Despite the recent cuts in interest rates, fears over the economy have meant that many first time buyers have been discouraged from entering the property market.”
“The credit crunch has meant that those still looking to get on the first rung of the property ladder can only borrow much lower multiples of their salary than previously. At the same time mortgage lenders are demanding much higher deposits and this is putting buying a property even further out of the reach of most first time buyers.”
With more people remaining in rented property the average rent across London will rise. Mr Ludlow explains: “Rents are jumping as more and more first time buyers opt to continue renting.”
“In our experience the longer people remain in the rental market the more likely they are to upgrade from flat sharing to renting their own one bedroom flat as their wages rise which is great news for landlords who have invested in higher quality properties.”
“Longer term renting will also mean that void levels are kept lower and the costs of advertising the property and carrying out credit checks on potential tenants is cut.”
Stephen Ludlow adds: “We can expect the trend in rising rents to continue as supply is further restricted. Developers have been pulling in their horns as they struggle to sell their existing developments, resulting in fewer properties on the market in the future.”
Rents are jumping as more and more first time buyers opt to continue renting.
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