Buy-To-Let Landlords Cash In On Mortgage Shortfall

It is a great time to be a player in the buy-to-let market, what with the shortage of new housing and the increase in the population of the UK breaking the 70 million barrier by 2031, it would seem there is no end to the shortage of demand. nnThe Government continues to expand higher education, requiring greater numbers of student accommodation and The Olympics of 2012 will also contribute to the surge in the demand for short-term property. A recent survey carried out by the Association of Residential Letting Agents revealed that average rents rose by four and two per cent for houses and flats respectively in the three months to the end of February. nnPeople are finding it harder to obtain mortgages, but they still need somewhere to live and frustrated first time buyers who have seen 120 per cent loan-to-value mortgages disappear are turning to landlords for a roof over their heads. nnMr David Newnes of Your Move Estate Agents said: "The demand is definitely there. The private rented sector is the out-and-out beneficiary of the liquidity squeeze. Not only do buyers have less access to credit, but those who can get it have been spooked by the negative sentiment surrounding house prices. Landlords are cleaning up." nnBanks became aware of this too and offered far more favourable rates to buy-to-let customers than private individuals. This is because rent can only keep going up as demand booms and also buy-to-let landlords have generally built up solid credit ratings as a result of borrowing to build up their portfolio. If they had not paid it back, they probably would have gone under years ago. nnYou would think that everything looked rosy for the UK property investment market, and it does if you are already involved. If you are hoping to break into the market or expand your current portfolio however, things are going to get a lot more difficult in the future. nnHouse prices are already falling and that has seen some property portfolios turn to dust in some overvalued areas. This is largely affecting landlords who over stretched themselves, which is easier to do than in the private homebuyer market. Buy-to- letters in some cases did not have to prove their income or even pay a penny up-front. nnThose in financial trouble before are facing up-to reality now because as with any competitive market, it is easier to undercut your rivals if you have a bigger amount of money to play with in the first place. If you have property all over the country, you are in a better position than those who invested in linear portfolios in undesirable areas of the country that are liable to the biggest falls. nnBanks are refusing to lend to anyone unless they put down large deposits and Nationwide has put the skids on those looking to buy large numbers of properties by limiting lending to £350,000. The days of opportunist entrepreneurs buying up whole rows of streets and renting them out for a song are over, unless you are already firmly established with a high value portfolio. It is a great time to cash in on an investment but maybe a little unwise to consider making any new ones. n