Building societies pay minimal interest on savings, and pension pots are struggling. No wonder people buy to let. But what effect is it having on the market? Tim Harrison reports
With building society savings accounts paying half a per cent interest, the desire to build up a nest egg for the future means many more people are becoming landlords.
Buy-to-let is booming, fuelled by mortgage lenders looking favourably on anyone who already has the security of owning bricks and mortar.
The consequence is that the lettings market in Putney is buoyant, especially at the studio and one-bed end, and estate agents are managing more and more properties.
Picture: This studio flat in Putney High Street is on at £1,050 a month with Andrews For further details on Andrews Putney click here
But it also makes it harder for first-time buyers to get on the first rung of the ladder as they find themselves in competition with investors as well as other would-be home owners.
“The buy-to-let sector is healthy and strong, and demand is high,” reports Allan Fuller lettings director Stuart Nickloes, who lives in Putney and is based at the agency’s Upper Richmond Road office (020 8788 8822). “In the last two months we’ve done 45 lets.”For further details on Allan Fuller Estate Agents click here
He points out that investor landlords and first-time buyers are often after different types of property. “For buy-to-let landlords, it doesn’t have to be a pretty property in a pretty road, but for first-time buyers, they are looking for a home,” he said.
Stuart agrees that factors such as low returns on savings and underperforming pension funds have contributed to the changing market.
“Buy-to-let is getting better because mortgages are increasing; the incentive is there, and people are finding it brings in a very good income,” said Stuart, who reckons he sees a couple of new landlords every week.
Just how good an income becomes clear when you compare the buy-to-let market in central London with the leafy suburbs. In the heart of Kensington, for instance, annual returns for landlords are around 4%. In areas like Putney yields can be more like 6 or 7%.
Sue Johnstone, lettings manager at Andrews in Putney High Street (020 8780 2667), had just finished speaking to a landlord who was buying two properties to let, and is very much representative of the new breed of property investors.
In fact, Arla, the Association of Residential Lettings Agents, reckons the average number of properties owned by each buy-to-let landlord is eight.
“New build in the Putney area all seems to be going to buy-to-let,” said Sue, pointing to the Barratt Homes Osiers development near the river by Wandsworth Park as a good example.
There, one-bedroom flats start at just over £300,000, with a total of 275 apartments being built and the project effectively being underpinned by the prospect of rental returns of over 5%.
Up to a fifth of new building in London is now reckoned to be funded by buy-to-let capital.
“With buy-to-let you’re often looking at an older generation who have assets they can release for their own children,” said Sue, adding that rent levels don’t actually alter dramatically from year to the next.
She agreed that first-time buyers were finding it a tough and increasingly competitive market to break into.
This studio flat is on with Andrews at £1,050 per month, and is right opposite Putney station. Central location, high ceilings, perfect transport links… and more than a dozen estate agents within 100 paces!
The shortage of one and two-bedroom flats in the Putney area keeps prices steady, which in turn fuels a buy-to-let market which is partly propped up by tax breaks for investors.In the UK in 2012, according to the trade body the Council of Mortgage Lenders, buy-to-let lending reached £16.4billion – a 19% rise on the year before.
Although buy-to-let is increasing, it still hasn’t caught up with the biggest buy-to-let boom in 2007, just before the financial crash, when the number of loans to investor landlords was nearly three times today’s levels.