Buy-to-let market dries up but landlords remain content

20 December 2007 / by None
Oversupply of rental properties has caused growth in tenant demand to slow according to the latest RICS Lettings Survey.

Although 20 per cent more chartered surveyors reported a rise than a fall in tenant lettings for the quarter, this was a significant drop compared with the 28.5 per cent reported last quarter. The market is still receiving some support from the subdued first-time buyer segment, as many individuals are still struggling to get on the property ladder.

The survey reveals that demand for family homes continues to be stronger than for apartments because there is currently an excess of new build flats on the market. This is reflected by the company's findings, which shows that 25.2 per cent more chartered surveyors reported a rise than a fall in demand for houses compared with 16.9 per cent for flats – a massive decline from 36.9 per cent last quarter.

RICS is expecting rental growth to slow further, although positive growth is still likely. "With rents still on the increase many would-be-buyers will find accessing the housing market even more difficult as they struggle to raise the capital for that first important purchase.

"However, many landlords will still take solace from uncertainty in the economy and enjoy the gains from rising rents," said company spokesperson Jeremy Leaf.

Research from Alliance and Leicester Mortgages backs up the view that buy-to-let landlords are feeling positive about the next 12 months, with 71 per cent considering their prospects to be either good or very good. A substantial 77 per cent say they are making a profit on their rental properties and 22 per cent are able to set aside some of this income.

Professional landlords with large portfolios appear to be the most financially secure. Of those with 20 or more properties, 49 per cent are earning enough to boost savings with their rental incomes, while 40 per cent use their property as their main source of income. Only 15 per cent of landlords with just one property managed to save any of the profits, while just four per cent were able to earn a living from the gains.



Head of specialist mortgages, Jeremy Claridge, said: "It is encouraging that buy-to-let landlords indicate they are feeling buoyant about the outlook for 2008. Regardless of a tough financial year, it is clear the buy-to-let property market is still healthy for longstanding landlords, especially for those in the South East of the country."

Find out more about buy-to-let mortgages and Alliance and Leicester mortgages

© Fair Investment Company, Ltd