Boom or bust for BTL?

It was initially postulated that the biggest casualty of the current conditions would be the first-time buyer (FTB) – seen as ‘poor risk’ and edged out of the market by narrowing criteria and reduced LTVs. However the attention has now swung towards the nation’s renters, with buy-to-let investors sweeping up the FTB’s redundant market share and pushing up rental values.

Research from Hamptons International has done little to dispel this fear. The estate agent reported that demand has intensified over the past few weeks, with September’s lettings renewals already rocketing by 40 per cent compared to August.

This certainly highlights a valid shift in the market, however Kate Whotton, regional lettings director at Hamptons International points out that the lettings market is currently at one of the busiest times of the year, fuelling the soaring demand.

Lee Grandin, managing director of Landlord Mortgages, feels that it is too early to say whether this increased movement is a direct result of the credit squeeze – instead putting it down to annual rental patterns.

He explained: “There is not enough property in the country, with EU migration and lack of buyers only making it worse. In the last month there has been an enormous increase in the number of people enquiring about rental opportunities, however I don’t believe this is a result of market conditions.”

While Grandin concedes that landlords are currently biding their time to see what will happen in the housing market, he doesn’t believe the current rental hikes are a result of investors’ eagerness to capitalise on the fallout from market conditions.

“The current lack of movement in the markets is putting landlords into a quandary. A large number are opting to wait in the wings and see what will happen in the buy-to-let markets – investors will stay put until they have a reason to move.”

In fact a bigger issue for today’s tenants is that landlords have already put their rental values up by 20 per cent, according to Hamptons.

Lenders have also spotted this lucrative niche in the market, either expanding their buy-to-let ranges in anticipation, as CHL Mortgages did on Tuesday, or revising rates like C&G in the hope of enticing new business.

Indeed a survey conducted by the Association of Residential Letting Agents (ARLA) found that landlords remain confident and committed to the sector with over half planning to increase their portfolios over the next twelve months – giving intermediaries and lenders alike reason to weight their offering towards the residential property investor.

However Danny Lovey, sole trader at The Mortgage Practitioner believes this “price rearrangement” could come back to bite the buy-to-let sector: “The buy-to-let market is due for a fall and paradoxically this could prove to make the situation worse in the longer term. The situation in the non-conforming markets is extremely dire.”