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Buy to let - still an attractive proposition?

Still an attractive option?

With the equities markets diving for cover at the prospect of war, interest on deposit accounts only slightly higher than the under-the-mattress rate and pensions going pear-shaped, investors could easily get the impression that it’s all gloom and doom out there. But there is one investment area that is holding up - and that’s the buy-to-let market.

Stories of landlords sitting on empty properties are greatly exaggerated. Although it is true to say that there have been some problems at top end of the market, particularly in central London. However, Malcolm Harrison of the Association of Residential Letting Agents (ARLA) says there have been cascades of rubbish written about the buy-to-let market and that “the bubble hasn't burst because there never was a bubble”.

“Everybody thinks of the boom time for buy-to-let between 2000 and 2001 when prices and rents were rising, but that was simply unsustainable,” says Mr Harrison. “Central London in particular was going skyward but became depressed because of the fall out, and was later affected by 9/11 and job losses in the city.”

Recent figures from ARLA show that while the average size of a buy-to-let mortgage in prime central London fell sharply by 22.5% during the last three months of 2002, overall these type of loans rose by 10% in the south of the country, by 11.3% in the Midlands and 13.8% in Scotland and Northern Ireland.

Picking the right property

Mr Harrison believes that now is a good time to move into the rental market because whenever house prices start to cool, renting becomes more popular. To pick an area he says you should draw a circle round an area where you live and look at places convenient to get to. Never go for a property that you would like to live in but choose somewhere that would be good for its purpose. He emphasised the importance of doing your research and talking to local estate agencies about rental opportunities.

Greg Barnes, assistant partner of estate agency Cluttons, comments that the days of the high return may have gone but that yields can produce 4.5% to 5% on the investment a year - certainly better that the return on a deposit account. He believes that you should think of this type of investment as being long term, over at least five years. He said that property is still a stable investment and is certainly worth including in your investment portfolio.

But for safety, he noted that many landlords these days only have a mortgage covering half of the value of their rental property. Mr Barnes added that you couldn't really go wrong by buying into university/business towns in the south west and home countries.

Property company Residential Property Investment Management notes that a property in good condition in a sought after location near a tube station in Greater London or other transport will always attract tenants.

The proof of the pudding showing the buy-to-let market is alive and well comes from the latest figures from the Council of Mortgage Lenders. They show an increase in lending for buy-to-let mortgages in the second half of 2002 to £6.7 billion from £5.5 billion in the first half. Mortgage arrears on these types of loans are fairly low with only 0.42% three or more months in arrears at the end of 2002.

Also, with only about 275,000 buy-to-let mortgages running in the marketplace, which has a total of 20 million homes, there is plenty of room for more would-be landlords to move in.


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Schedule of Articles

property investing
property refurbishment
buying overseas property
moving house
home letting
buy to let
home improvements

top 10 celebrity areas
6 up & comming areas
5 signs that an area is up & comming
city types yearn for the country in town
your place in the sun
equity release
planning permissions & extensions
estate agents
rent or buy
buy to let
mortgage overpayment
mortgage endowments
mortgage protection
stamp duty
self build your home
electrical surveys
the cost of moving in
the perfect neighbourhood
council tax
house price league
good neighbours
stamp duty land tax
top 20 towns 2003
cut the cost of moving
interest rates
buying in scotland
dream homes
first time buyers
the worth of uk homes
bad estate agents
keeping up appearances
home improvements


Please note that articles on this site & any other 'planning-approval' related web site does not constitute professional advice. All articles are intended to provide a general view of many subjects. We suggest you to consult a solicitor before making any important decisions.  The author is not an expert in any given field.

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