Finance News

Property Investment is Bucking Economic Trends

Em Morley - August 19, 2012

The Council of Mortgage Lenders (CML) has revealed there are now in excess of 1.4 million buy-to-let loans, as interest in the market shows no sign of stopping.

Director General of CML, Paul Smee, observed: “The rental sector has grown strongly over the last decade or so and buy-to-let continues to deliver a wider choice for tenants.”[1]

Property Investment is Bucking Economic Trends

Property Investment is Bucking Economic Trends

 

Growth

Despite the fact that the last quarterly figures showed that buy-to-let growth had dropped by 5%, this was still in comparison to a period of equilibrium in the housing market in general. Furthermore, a report from Connells Survey and Valuation indicated that prices for buy-to-let properties went up by a considerable 31% over the last 12 months.[1]

The amount of money that a buy-to-let investor is able to borrow has remained at a constant 75% of their property value for the previous three years. During the same period, lending rules for other types of mortgages have changed considerably.

Retirement

Another survey, this time from LSL Property Services, indicates that three in ten buy-to-let investors entered the market in order to eventually live off their investment during their retirement years. This is unsurprising, considering the potential rental returns on offer. LSL suggest that the average monthly income achieved by the investment in the buy-to-let property now stands at 5.4% in England and Wales. This gives an average annual yield of around £8,884.[1]

It is easy to see why more people are choosing buy-to-let investments, with that average yield considerably more than on a regular savings account or the dividend from the FTSE 100 Index.

Concern

Amidst the positivity, there is still some cause for caution. Despite the last CML figures indicating that buy-to-let borrowers more than three months in arrears fell during the last quarter, the National Landlords Association suggest that 16% of landlords with just one property make a loss on their investment.[1]

In the same survey, 40% of landlords said that they were concerned over growing rent arrears during the upcoming months.[1]

[1] http://www.landlordexpert.co.uk/2012/08/19/property-investment-is-bucking-the-economic-trend/