Tue, 04 Sep 07
The buy-to-let market has been accused of being many things in Britain...
Some have labelled it a means of stopping young people getting on the housing ladder by snapping up homes that would otherwise be on the open market.
Others have questioned the wisdom of the continued boom in investment, given the increased costs associated with the higher interest rates imposed by the Bank of England during the last 13 months. Yet still the market grows - which suggests that a serious appraisal is needed.
Mortgage Solutions Online commented today that the idea that first-time buyers are being frozen out of the market by the buy-to-let industry is "much over-exaggerated", arguing instead that "the reality is that many potential first-time buyers have made a positive decision to delay buying property because of a desire to study for longer, travel more and enjoy the greater flexibility and lifestyle that living in rented city centre accommodation provides".
Vacant properties ‘on the wane’
One particular accusation leveled at investors is that they buy up stock and then leave it empty for long periods. But if this was the dominant picture, then the amount of such unoccupied stock would, one might expect, rise as the amount of buy-to-let investment rises. However, the Empty Homes Agency says otherwise.
A spokesman for the charity, which campaigns on this very issue, said last week that the number of vacant properties was on the wane, adding: "There will be a continual improvement. There is a year-on-year downward trend that has already been happening and it is speeding up."
Mortgage Solutions states that buy-to-let has now gone from being a "niche" market to a "mainstream" one, adding that "the outlook for the future of the buy-to-let market looks good".
That last statement has also been questioned recently, even in the Financial Times, but buy-to-let mortgage firm Paragon has found that the industry is in rude health. Its survey of landlords at the end of the second quarter of 2007, published today, shows that their confidence in the prospects of property assets improving is on the up. The index measuring current value against anticipated value in a year's time is up to 160 from 155 in the last quarter and 150 a year ago.
Moreover, demand for rental property is still rising, enabling landlords with three or more properties to overcome the interest rate rises and enjoy average yields of 6.3 per cent at the end of the second quarter, compared with 6.1 per cent in February.
Rental demand rising
This second point is critical. While it is true that overall demand for homes in the residential mortgage market is not being met, it is also the case that the demand for rented accommodation is also rising.
Pointing this out, Paragon's managing director John Heron said many young people, students and immigrants were not presently seeking homes to buy and were instead looking to the buy-to-let sector to meet their needs.
He said: "Despite ill-placed criticism of the buy-to-let sector, rented accommodation is becoming an increasingly important part of the UK housing market - providing homes for the growing number of people who do not want the commitment of owning their own property - and this is reflected in landlords' confident outlook for the sector."
In such circumstances, buy-to-let can indeed consider itself to be increasingly mainstream.
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