Press Release Summary: Almost as often as predictions of doom and gloom in the UK buy-to-let property market are made, it seems, new figures are published to suggest that the end is anything but nigh. In this respect, October is just another month
Press Release Body: Almost as often as predictions of doom and gloom in the UK buy-to-let property market are made, it seems, new figures are published to suggest that the end is anything but nigh. In this respect, October is just another month.
Those taking a particularly negative view include Paul Holmes, chief executive officer at first-time buyer solutions company Firstrung. He declared today that buy-to-let \"died when rates reached five per cent\" this year, at which point, he said, yields became too low. \"Anybody continuing to buy in to the buy-to-let madness now needs a therapist,\" he added.
Somewhat in contrast to this view, the evidence presented this week by the Council of Mortgage Lenders (CML) suggests the sector is continuing to boom, with what it classifies as other borrowing up 40 per cent in August. This amounts to £7.8 billion and includes buy-to-let, reports financemarkets.co.uk
The CML added that the sector was being \"underpinned by house price increases, tenant demand, rent increases and landlords\' willingness to take long-term investment decisions\".
All this, the website noted, was happening while the number of people taking out mortgages fell and the Northern Rock crisis took centre stage.
So is it the case that an increasing number of people are throwing their money at buy-to-let property when they need to spend it on a good psychologist instead?
One issue which needs to be addressed is the well-known trend for investors to look at the long-term. True, rates may be fairly high now, something many feel will not be true a year from now (a Reuters poll of economists this month found the majority tipping two rate cuts in 2008). Such investors, therefore, are not necessarily buying for immediate gains, but for the long-term. Thus it may be that Paul Holmes is aiming at the wrong target, even if he is right about anyone who is in it for the short-term.
Writing in the Independent this week, managing director of economics at HSBC Stephen King said the trend for buy-to-let to boom at times of lower rental yields indicates that \"people have invested not for income but, rather, for capital gain,\" demonstrating that he shared this view about the market being long-termist.
Of course, there are other factors to consider, such as the situation in Scotland. Research from Landlord Mortgages showed that rental yields in the country were up 0.45 per cent in the last quarter, while those in England stayed the same. This indicates that, as with the residential housing market, there are significant regional variations, mortgageintroducer.com reports.
Furthermore, the fact that yields had remained constant in England, with only London continuing to fall, was taken by the organisation to show that the worm is turning.
Lee Grandin, managing director at Landlord Mortgages, put this down to the housing slowdown, suggesting that the end of high inflation in the sector meant that yields were catching up and even gaining as the number of house hunters declined.
He said: \"This can be attributed to a cooling property market, which has allowed rents to increase in line with the healthy capital appreciation these buy-to-let properties have experienced over the last few years.\"
Thus it may be that, far from being dead, buy-to-let is not only alive, but in an excellent position to thrive in the months ahead, quite apart from the long-term benefits.
2012
