Buy-to-let continues to boom
22 January 2004
The growth of the buy-to-let sector continues, according to a new report.
However, Nationwide's specialist subsidiary, UCB Home Loans, claims that the rate of growth is now slowing, as expected. The company predicts that this trend will continue over the next couple of years.
Over the past year, interest in purchasing buy-to-let property has shifted towards more northern areas. Latest figures from the Association of Residential Letting Agents show that 50 per cent of all new buy-to-let mortgage lending now takes place in the Midlands, the North, Scotland and Wales.
Figures released in September by the Council of Mortgage Lenders showed that gross buy-to-let lending totalled £7.7 billion in the first six months of 2003, compared with £6.7 billion in the second half of 2002. The total size of the market at mid-2003 was 334,800 buy-to-let mortgages worth £31.2 billion, accounting for around 4.3 per cent of all residential mortgage lending.
Re-mortgaging has become increasingly popular in the buy-to-let market, accounting for 39 per cent of gross mortgage lending in the first half of last year, UCB Home Loans reveals.
Charles Reed, managing director at UCB Home Loans commented: "Investors are also taking advantage of increases in property prices by re-mortgaging and ploughing the money into new purchases."
Increasing numbers of would-be first-time buyers are now renting property whilst they save for the deposit on their first purchase and the larger number of rental properties available is leading to higher expectations among tenants regarding the standard of property that they rent.
"With greater competition to find tenants in some areas, investors need to undertake thorough research to make sure that they buy the right type of property in the right area," Mr Reed advises.
UCB Home Loans reports that rental yields vary from area to area, but landlords can generally expect to receive between seven per cent and nine per cent gross annual rental return in more active parts of the country, and nearer five per cent in areas where house price rises have slowed down and the ratio of landlords to tenants is higher.
Buy-to-let activity is currently buoyant in a number of areas, including Bristol, Southampton, Leeds, Manchester, Liverpool, Newcastle and Glasgow.