Clouds loom on the horizon
LANDLORDS are enjoying a period of relative prosperity, yet the mid-term prospects for the buy-to-let market are predicted to be very difficult, new research from landlords broker SimplyBusiness.co.uk has revealed.
Buoyed by low interest rates and the continued tough environment for first-time buyers, buy-to-letters are enjoying strong yields on their properties, according to the study among 189 landlords.
Yet, with hikes in interest rates anticipated, and political parties pledging to assist first-time-buyers to get on the property ladder post-election, the longer-term prospects for the industry are far less certain. More than three quarters (78 per cent) of landlords are optimistic about the buyto-let market over the next 12 months.
Throughout the recession, barely a quarter (25 per cent) have had to lower their rents to keep tenants.
A strong majority (70 per cent) have seen property prices starting to increase in their areas, easing capital losses brought by the recession, and generating a higher barrier to entry for first-time-buyers – thus driving up rental demand.
“With high prices and low interest rates, landlords tell us they’re able to reap healthy margins at the moment,” said Julian Watson, landlord product manager at SimplyBusi- ness.co.uk
“However, in our study, many expressed grave concern for the longer-term prospects of the market.
“They are realistic that interest rates can’t stay this low indefinitely, and are nervous of initiatives the next Government will introduce to assist first-time-buyers. Indeed, 86 per cent of respondents felt the announcements made in the recent Budget would not help landlords,” he said.
“New build has also slowed in the recession, driving up rental demand for the existing housing stock, but as our landlords identify, a resurgence in this sector will increase competition for lettings.”
Throughout the last 14 months of the global credit crisis, only a quarter (26 per cent) of landlords have purchased a new property to let.
Similarly, few landlords (28 per cent) expect to buy another property in the next year.
“The recession appears to have dissuaded casual buyto-letters from reinvesting, while the more professional investors continue to speculate,” he added.
However, for those who are investing in new property, mortgages remain scarce.
“We have seen a rise in the number of buy-to-let investors re-mortgaging their existing residential property to access cheaper finance than is currently available through straight buy-to-let mortgages,” said Chantelle Bleasdale, managing director of mortgage advisors ClickCover.