The UK property market is a vast pool of opportunity – if you’re looking to immerse yourself in the buy to let sector. Reasonably priced properties can be found and rental accommodation is in demand, making it a win-win for potential landlords everywhere. Is now the best time to look at your buy to let options?
What to buy?
The research found that terraced houses are the most popular investment option. However, the popularity of flats and maisonettes, as well as semi-detached and detached houses rose to the highest level yet this year.
John Heron, Managing Director of Paragon Mortgages, says: “It is very encouraging to see private landlords looking to invest in a wider variety of property types.”
“This may well be in response to the fact that we are starting to see higher demand for larger rented properties from families who are choosing the private rented sector because they do not want to, or cannot buy into, today’s difficult economic environment.”
Whilst according to Paragon research, popularity rests with terraced houses, some 58% of landlords also expressed an interest in investing in flats and maisonettes and 30% in semi-detached houses.
A further 21% of landlords will buy detached houses, 9% bungalows and 9% multi-unit blocks.
Year-on-year, the volume of buy-to-let mortgages have increased 14% and the value advanced has increased by 18%. The Council of Mortgage Lenders (CML) show that buy-to-let lending has increased by 5% in the second quarter of 2012 alone and is only set to continue growing.
CML director general Paul Smee says: “Buy-to-let is continuing to show signs of recovery, and growing broadly in line with expectations. The rental sector has grown strongly over the last decade or so, and buy-to-let continues to help deliver a wider choice for tenants.”
First time buyers face an uphill struggle trying to get onto the property ladder as banks and lenders ask for bigger and bigger deposits. New research shows that almost one in three can’t afford to raise a deposit, pushing them into the private rental sector.
Post Office research shows that nearly half (47%)of prospective first time buyers expect it will take them ten years or more to save for a deposit. This is good news for landlords.
In addition the average age of a first time buyer is now 35 years old and this has been steadily rising since the 1960s. By contrast, the average age of a first time buyer in the 1960s was just 24 years old.
John Willcock, Head of Post Office Mortgages, says: “The average age of a first time buyer has been creeping up over the past 50 years and a perceived ten year wait to raise a deposit doesn’t help matters. The sheer size of the deposit is the most daunting thing for would-be first time buyers, but it appears to be worth the wait if it works out cheaper than renting.”
Last month, figures found that more than 100,000 tenants had fallen into severe rental arrears, which means that they owed more than two months worth of rent. This figure has increased by more than a quarter in the last year.
The cost of rent is at a record high and so it might not come as a surprise that so many people are falling into arrears.
Rental rates rose by 1% last month to an average of £725, according to LSL buy-to-let index. Record high rates are taking their toll on tenants as many are slipping into debt. Pressure is growing on tenants too as the latest rise in rent prices was the fourth consecutive month in eight out of 10 regions in July.
This has a knock-on effect on landlords who, in turn, in are struggling to meet their mortgage repayments. The repossession rate in relation to the number of mortgages has reached a record high of 0.24% for the first time in the buy–to-let market. Figures from the CML and the Financial Times show that there were 18,100 repossessions in the first half of 2012, with a massive 19% of them being buy-to-let, up 10% since 2009.