Buy-To-Let Remains Investment of Choice

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As a result of savers receiving poor returns from banks and building societies, many home buyers are choosing to turn to residential property as a means of adding to their existing income. This is further supported by high demand from tenants.

Investments in buy-to-let continues to outperform most major asset classes as rents continue to rise.

Around a sixth of the population are currently living in rented accommodation with private landlords which is an attractive proposition for those looking at investing within the buy-to-let sector.

Allison Thompson, MD of lettings at one of the UK’s largest property services groups, said: “The private rented sector is vital to our economy and without it would see a huge increase in homelessness,”

The property company surveyed 271 landlords across its country-wide estate agency brands. The sample ranged from those with a single investment property (46%), to those with ten or more investment properties (4%). The study found that in total, only 7% of landlords plan to leave the buy-to-let market in the next year and 12% plan to reduce their portfolio.

Those remaining in the market have to decided to maintain their portfolio size (71%) or planned to expand it (10%).

The reasons for landlords wanting to leave the buy-to-let market included changes in policies (e.g., increased regulations), the economy (interest rates, energy costs etc) and personal circumstances unrelated to income.

Thompson commented: “It is very good news that 81% of our landlords still see residential property as the best form of investment and plan to maintain or increase their portfolios over the next year.

“A property investment is for the long term. It is one which will see many economic cycles and changes of Government, but despite interest rates rising and falling and regulations coming and going, a BTL investment will invariably deliver a good financial return.

“However, the government must realise that the housing crisis – specifically the under-supply of rental units – cannot be resolved by penalising the already stretched private rented sector (PRS). It is vital that the Government re-considers the components of the proposed legislation which are putting off some landlords.

“This includes the much-talked about proposals to require rented properties to have an EPC rating of C, and also proposals surrounding Section 21 and assured shorthold tenancies (ASTs). It has been suggested that tenants might be permitted to serve notice of two just months at any point.  This would create considerable uncertainty for landlords, which is unwelcome in an already challenging market.  There has been a request to amend this, so that two months’ notice is only permissible when the tenant had been in the property for at least four months. This compromise would provide some further security for landlords, while allowing flexibility for tenants.”

Within the UK property market, there has been talks of whether buy-to-let investment could potentially be ideal for first time buyers.

A building society based in Suffolk has released a series of products aimed at investors who do not yet own their own home.

In order to encourage younger investors, the banking society has introduced new products as well as changing the lending criteria.

Non-home owners who have applied have been told that the full buy-to-let criteria will be applied including interest cover ratio and minimum income requirements.

Charlotte Grimshaw, head of intermediary relations at the building society, says: “We know our niches extremely well and have a very good understanding of the issues facing brokers in these markets at the moment. It matters to us that we’re there to support those whose circumstances means they need a specialist lender on their side – particularly as everyone faces the uncertainty of the current economic climate.”

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