Press Release Summary: Experts suggesting the buy-to-let market will comfortably survive the housing slowdown appear to be right, if the latest figures are anything to go by.
Press Release Body: Experts suggesting the buy-to-let market will comfortably survive the housing slowdown appear to be right, if the latest figures are anything to go by.
These have been provided by UK Mortgages, which has shown that the rental returns being enjoyed by landlords are going up just as less people are buying homes, with the residential mortgage downturn meaning more demand for rental property.
According to the Paragon figures, rents have risen by 6.9 per cent, or about £700 a property, over the last year, with yields stabilised at around six per cent for the last 15 months. While interest rates may have gone up, this has been counterbalanced by the higher total returns. For these, the current average is 14.2 per cent, compared with 12.9 per cent in March this year and 10.5 per cent in September 2006.
The figures for gross mortgage lending, by contrast, are significantly down. Council of Mortgage Lenders\' (CML) figures show that the September total of £30 billion was 12 per cent less than August. The CML added that while it is normal for the figure to drop between August and September, this is normally by around five per cent. Moreover, the September 2007 figure is only 2.5 per cent higher than the £29.2 billion recorded in the same month in 2006, the lowest year-on-year increase for two years.
Lest it be assumed that the two statistics are a coincidental correlation rather than a symbiosis, Paragon chief executive Nigel Terrington stated that what buy-to-let has been doing is offering a new alternative to young people whose residential choice would otherwise consist either of buying at a cost that would prove hard to finance or staying at home with their parents.
\"Now, the private rented sector is offering good quality alternatives to house purchase, enabling people to live in a quality of home they may not necessarily be able to afford to buy,\" he pointed out, adding: \"Those people who would have been looking to purchase their first home in the current environment have the option of affordable and good quality rented accommodation instead.\"
Thus, he concluded, far from investing unwisely, \"landlords expand their portfolios in response to identified tenant demand\", which includes growing demand from students and immigrants as well as young people who have postponed attempts to get on the housing ladder.
If Mr Terrington is correct, the buy-to-let industry is therefore in far better shape than some would suggest. Investors are operating more wisely, demand is actually growing both because of the residential market downturn and through other demographic factors, while all the time renting remains a financially viable option.
This last point is critical. F&C investments, in inviting visitors to its website to express their opinions on whether people should buy or rent at present, noted that renting is, on average, only two-thirds as expensive as buying. Thus the current housing situation appears set fair for buy-to-let. Investors have every good reason to still make a good return, while still offering a lower housing cost for their tenants
2012
