Buy to let landlords find it difficult to find property investment finance
Added 02.02.10
Half of landlords who want to expand their portfolios are being frustrated by the lack of mortgage finance according to a survey conducted by LSL Property Services.
The poll found that 49 percent of landlords surveyed said the current market is attractive for investment and that they wanted to expand their portfolios. But only 27 percent of landlords say they’ll be able to buy more property in the next 12 months.
The lack of availability of mortgage finance remains the fundamental barrier for landlords.
David Brown, commercial director of LSL Property Services, said: “2009 saw the buy to let market return as a viable investment. Landlords recognise this, despite the rough ride they have had to endure over the last couple of years.
“The average landlord made losses in 2007/8, but 2009 marked a return to form for property investment. But the availability – or lack - of mortgage finance is holding the sector back. Even experienced landlords who are keen to take advantage of lucrative returns and improving market conditions can’t get access to the cash they need.”
A modest 11 percent intend to reduce their involvement in the private rental sector – a figure that includes those selling for retirement or lifestyle reasons.
Only 12 percent of respondents mentioned the availability of finance as a positive factor for buy to let investment.
Landlords’ confidence in the market is driven by their desire to maximise returns in a low interest rate environment, with a third of them attributing their positive sentiment to the superior capital returns of buy to let as compared with other forms of investment. In 2009, a typical landlord made a total return of 7.6 percent – higher than many other forms of investment.
While stock market investments had a good run in 2009, with the FTSE100 up close to 1,000 points, it remains down on the start of 2008, reflecting the relative volatility of stock market investments.
Landlords believe property prices are attractive in the current environment. Nine out of 10 of those landlords who see now as a good time to buy state attractive current house prices as a motivating reason.
Strengthening demand from tenants has played an important role in the market pick-up. 39 percent of respondents think tenant demand has grown in past six months, and two in three landlords anticipate the number of tenants looking for rental properties will grow in the next two years as it remains difficult for people to get on the housing ladder.
David Brown continued: “With the shortage of mortgages for first time buyers, we’ve seen significant growth in demand for rented homes. However, the difficulty of selling also led to many properties being put on the rental market, which created a glut in some areas.
“That surplus has now corrected itself and the rentals market is looking very sound, especially as thousands of potential home buyers continue to rent while they save for larger deposits. This is set to continue.
“Overall, the message is that buy to let is back, with the fundamentals of growing tenant demand and attractive yields once again encouraging a more positive outlook. The cloud on the horizon remains the limited availability of mortgage finance - and that needs to change".
News feed courtesy of Residential Landlord