Overseas landlords entering the UK are making it harder for first time buyers

Landlord Expert
By Landlord Expert September 27, 2012 15:24

An influx of foreign investors is driving a resurgence in Britain’s buy-to-let market, holding house prices steady but threatening to push up rents and crowd out first-time buyers.

Growth in buy-to-let demand had helped “to put a floor under prices”, according to the Bank.

The basic premise that landlords are crowding out first-time buyers is right. If first-time buyers weren’t competing with landlords, then prices would be cheaper.

Average rents reached a record high in July of £725 a month as the backlog of frustrated first-time buyers in the private rented sector showed no sign of clearing.  As lending to those without substantial deposits remains depressed, demand for rented accommodation can only go one way – providing further upwards momentum for rents … Fierce competition for properties is enabling landlords to increase rental prices to new highs.

Rents are rising significantly faster than overall inflation – 2.6pc in July, wage growth – 1.8pc in June, and house prices, which fell 0.6pc in July.

Rising rents and stable, or slowly rising prices, have lured more buy-to-let landlords into the market.

At the same time, low interest rates have helped keep arrears and repossession rates below those of the owner-occupier market – making buy-to-let attractive for lenders as well.

With rents rising, more lenders are making more buy-to-let deals available, according to Mark Harris, chief executive of mortgage broker SPF Private Clients.

And greater availability is pushing down rates. As a result, landlords are out-competing first-time buyers. In 2011, lending jumped by 40pc to £14bn and, in the three months to June this year, rose by 20pc on the same period last year. Arrears rates are 1.56pc, below the average 2pc rate for the whole market, according to the Council of Mortgage Lenders.

“With arrears down, lenders are gaining more confidence in this part of the market and are helping meet the appetite for finance from investors,” Mr Newnes said.

With yields at 5.3pc in July, according to LSL , and rents still rising, buy-to-let generates better returns than many standard investments.

Private landlords hold 12.8pc of the UK housing stock, compared with 10.5pc before the recession. In 1999, it was 1pc.

Regulators expect that to fall further. The Financial Services Authority said in December that its “responsible lending” requirements would push more people into renting. .

One consequence has been that the dream of creating a property-owning democracy is fast unravelling. In 2003, 71pc of houses were owner-occupied. Today, the figure is just 66pc.


Landlord Expert
By Landlord Expert September 27, 2012 15:24

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