UK landlords the big winners in mortgage shortage
The buy-to-let boom shows no sign of ending as the mortgage famineforces more middle-aged people to remain tenants rather than become homebuyers and rents continue to rise, according to the Royal Institution of Chartered Surveyors (RICS).
Estate agents and mortgage brokers point out that many new rentiers are reluctant landlords because they simply cannot sell at the house prices being asked. Other experts reckon some landlords are being greedy and rents must fall when demand fails to match supply, with some early indications of that happening in London.
But according to the latest RICS Residential Lettings Survey, 13pc more chartered surveyors reported rents rose rather than fell in the three months to April. This growth was largely driven by increasing demand as a net balance of 15pc more respondents reported rises in prospective tenants, with houses in greater demand than flats.
Average rents have now grown consistently since 2009 as the problem of unobtainable mortgages and large deposits required by lenders remain a barrier to home ownership, with many potential buyers forced to turn to the rental market, pushing the average age of first-time buyers to 37.
Unsurprisingly, with rents steadily increasing, landlords’ gross yields also continued to grow during the early part of the year, although the pace of growth has begun to slow. This was the case in every part of the UK with the exception of London where tenant demand also saw a slight downturn.
Peter Bolton King, a director of RICS claimed: “The rental market is still fairly buoyant and this looks likely to continue, given the challenges facing the sales market. Indeed, mortgage finance may become even harder to access particularly for first-time buyers if the euro crisis continues to deepen.
“This points to tenant demand continuing to outpace supply. As a result, rents will remain on an upward trajectory, adding to the pressure on many households whose incomes are already being squeezed.”
Jonathan Harris, a director of mortgage broker Anderson Harris, agreed: “All the indicators are that rents are continuing to rise and while growth may be slowing in some parts of the country it does not necessarily follow that rents are actually cooling off.
“Rental properties continue to generate a decent income for many landlords because of the shortage of rental property available and continued demand from would-be buyers who simply can’t get a big enough deposit together to get on the housing ladder. We don’t expect either of these factors to change anytime soon.”
Similarly, Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “With lenders cutting back on the volume of lending they are prepared to do because of problems in the eurozone and in order to meet Basel III capital requirements, it is getting harder to get a mortgage.
“This is likely to stoke the buy-to-let market further because if people can’t get a mortgage, then they will be forced to rent for longer. Although more property is coming onto the rental market it is still not enough to meet growing demand, which will push up rents a little further.’
But Ed Mead, a director of specialist letting agents Douglas & Gordon, was more cautious. He said: “I think you’ll find the increasing supply will see rents level off. Although demand is up, the supply increases month on month as many who can’t sell into a market short on finance find letting a better alternative.
“In London, the cool off has perhaps been faster as agents have overheated asking prices sellers’ expectations, meaning that rather than sell for less than they want, they’ll let for rent; hoping the market will catch up. As the macro economic situation looks fragile, I think short term that’s a risky strategy.”
Here and now, it’s an ill-wind that blows no good and the mortgage famine is yielding rock steady profits for landlords while stock market investors suffer one shock after another.