Buy-to-let market 'cooling down'
THE buy-to-let property market is showing signs of cooling as slowing house price rises and recovering stock markets make property a less attractive investment, it was claimed today.
UCB Home Loans, part of Nationwide Building Society, said while the sector continued to increase, the growth rate was easing following two years of rapid expansion, and this trend was expected to continue for the next couple of years.
At the same time investment landlords were turning their attention away from London and the South East to northern regions which have seen the strongest house price growth during the past 12 months.
Figures from the Association of Residential Letting Agents showed that during the three months to the end of September 50% of all new buy-to-let lending was on properties in the Midlands, North, Scotland and Wales.
UCB added that the buy-to-let market was currently particularly buoyant in Bristol, Southampton, Leeds, Manchester, Liverpool, Newcastle and Glasgow.
Charles Reed, managing director at UCB Home Loans, said: 'Rapid house price increases have spurred interest in the buy-to-let market, where a combination of capital growth and rental income has been seen as an attractive proposition when compared with returns from pensions and other forms of investment.
'The equity market actually had a better time in 2003 than many people expected, so we may see a gradual cooling of this attitude over the coming year.'
Nationwide predicts house prices will rise by just 9% during 2004, following gains of 15.6% in 2003, and 25.3% in 2002.
UCB said rental yields varied from area to area, but landlords received between 7% and 9% of their property's value in rent each year in the most active areas of the country and 5% where house prices had risen rapidly in recent years and there was now a high ratio of landlords to tenants.
It said increasing numbers of first-time buyers were renting while they saved money for a deposit, although a larger number of properties available to rent meant expectations among potential tenants were higher.
According to the Council of Mortgage Lenders, by June 2003 there were 334,800 buy-to-let mortgages worth £31.2 billion, accounting for around 4.3% of all residential lending.
Remortgaging accounted for around 39% of lending to investment landlords during the first six months of 2003 as people took advantage of property prices by increasing their loan and ploughing the money back into new purchases.
