Landlords have their own financial worries


September 6, 2012

Bob Young is managing director of CHL Mortgages



Despite wider economic uncertainty, the mood amongst buy-to-let landlords remains unbowed if recent confidence gauges are anything to go by.


The latest sentiment survey from LSL Property Services revealed just shy of half of all respondents believe now is a good time to invest in property and just 1% are looking to offload properties.


Such buoyancy is being aided not only by continued strong tenant demand, but also by attractive property prices.


With first-time buyers unable to capitalise on much more affordable accommodation due to difficulties amassing deposits and lenders shying away from higher loan to value mortgages, landlords have been able to snap up bargains and let them out to keen renters.


It is the strength of this tenant demand that continues to force rents upwards and a record average of £725 was reached in July.


This historically strong performance is evidenced by the 44% of landlords who say they have witnessed increased demand since the start of the year and nearly two-thirds expect demand to thrive in the coming year.


Such enthusiasm is understandable given current conditions, although a recovery for the first-time buyer market or an injection of increased supply through new house building could temper this optimism slightly.


Pundits predicting a marked improvement in either scenario are notable by their absence, so landlords can breathe easy for a while yet.


While many buy-to-let landlords are in a better financial position than first-time buyers given their larger deposits, previous experience of borrowing and established relationships with lenders, they have not been immune to the obstacles that have faced potential homeowners.


Half of all landlords surveyed by LSL think mortgage finance is now more difficult to obtain than in July 2011 and 45% reported their monthly repayments had increased over the same period.


This provides a staunch rebuttal to those quarters of the market who seem to think lenders are rolling out the red carpet to property investors at the expense of first-time buyers.


The fact of the matter is that it is tough going for all parties, but buy-to-let landlords representing a good home for funding at present.


The private rental sector has not been completely dependent on the big banks in the past few years and has been able to access funding from specialist lenders to make up for some of the funding shortfall, but there is always room for improvement and further investment would not be sniffed at.


The Funding for Lending scheme tranche seems to be filtering through, but it has been a pretty gradual process thus far.


A few lenders have sharpened up their rates and displayed a keenness to get things moving again, but the fact the five-year rate war was over almost as soon as it had started suggests lenders aren’t completely ready to go ‘toe to toe’ again just yet.  


All things considered then, the buy-to-let market remains in strong health, with the majority of stakeholders upbeat about the sector’s prospects as we head towards the final quarter of the year.


As with all things it would be nice if conditions were even better, but a quick glance in the rear view mirror to remind ourselves of where the sector was just a few years ago gives reason to be glad of where we are now. 

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