By Paula Planelles Manzanaro
Property Correspondent
London is experiencing a buy-to-let boom according to Savills the upmarket estate agent, with investors overshadowing first time home buyers. High street lending has all but dried up for those who do not have perfect A grade credit history, opening the door to cash rich investors to snap up properties.
According to the housing charity Shelter, almost one million Britons have needed an emergency “payday” loan to help pay their mortgage or rent in the last year according to a report in the Daily Telegraph. Rents have seen increases of up to 20% in London according to letting agents.
Buy-to-let investors who have increased their market share by 42 per cent since 2007, which represents now the 19 per cent of the total value of residential property sales, according to an article published by Financial Times. Savills has stated that the number of home owners in the United Kingdom has fallen 2 per cent, with the lowest level of housing output since 1923.
The lack of bank lending has brought returns to cash-rich buy-to-let landlords, which is threatening the property market in the country, helping trigger its collapse. Yolande Bares, head of research at Savills, considers that “the expansion of the private rented sector is the single most important issue in the UK property market at the moment”.
Ms. Barnes added that the number of private landlords will grow because of the fact that buy-to-let mortgage deals are overshadowing first-time buyers’ loans. The Daily Telegraph in a report said "that the volume of mortgages handed to private landlords rose 16 per cent to £3.8bn in the third quarter of last year", according to the Council of Mortgage Lenders.
The expansion of private home proprietors is so important among the property market in the UK that online news sites such as This is Money gives advice to become a more profitable buy-to-let landlord.
Equity rich buyers have also increased in London, often from abroad who are interested in the British properties. The Financial Times in a report said that “accidental landlords” who bought homes when they expected capital growth, are also benefiting from the rental market increase, becoming more enthusiastic about holding homes, Tim Hyatt, president of the Association of Residential Lettings Agents, states.
“After the collapse of Lehman Brothers, you had people becoming accidental landlords as they were sitting on properties which they bought for capital growth and they couldn’t sell”, Mr. Hyatt adds.
Tim Hyatt also predicts that the number of houses owned by private landlord could be 6.6 million, around 2.5m more than nowadays. But, whereas landlords take advantage of the current property market situation, first-time buyers need to face up to the excessive rents. In this sense, Mr. Hyatt warns that if the rents continue increasing, it is likely that first-time buyers will be “unable to buy and cannot afford to rent”.
If this happens, Ray Boulger, mortgage broker at John Charcol, the UK's leading independent mortgage and remortgage adviser, warns that “mortgage lenders will have no choice other than to reduce lending which will have a negative impact on the level of activity in the housing market and on property prices”.
“I expect demand from buyers next year to be lower, primarily as a result of more difficult mortgage conditions, but also because the economic outlook will sap consumer confidence further, with unemployment, or the fear of it, a particular worry for many”, Mr. Boulger stated in an article published by The Daily Telegraph.
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