Buy-to-let market tempered by interest rate rises

29 November 2006
Instructions to let property rose at the slowest pace since the second quarter of 2005 over the autumn, according to the Royal Institute of Chartered Surveyors (Rics).

The residential lettings survey finds investors behaved more cautiously between August and October, particularly in letting flats.

Six per cent more chartered surveyors reported a rise in instructions to let property than reported a fall, compared to thirteen per cent in the previous quarter.

The trend reflects the falling profits available in the buy-to-let market due to rising interest rates, with quarter-percentage hikes in August and November taking rates to five per cent.

"The recent interest rate increases have painted the buy-to-let market as a less than favourable investment," commented Rics spokesperson Jeremy Leaf.

Demand for rental properties among tenants remained strong, however, with demand exceeding supply for a tenth consecutive quarter.

According to Rics, demand is putting upward pressure on rents, although an ebb in confidence meant rents did not rise quite as fast as house prices, resulting in the first decline in gross yields for the buy-to-let landlord in two years.

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