November 2011 News

Buy to let is still an attractive option

2nd November 2011

Buy to let property is still an attractive option but current or potential landlords need to be careful about how and where they make their investment, one specialist has advised.

That is the opinion of Andrew Finlan, Sales manager of Nicholas Humphreys, who suggests there could be an increase in the number of landlords looking to expand their portfolios in the coming months, if conditions are right.

It comes after Defaqto reported that the number of buy-to-let mortgage products on the market has grown by 104 per cent over the last three years, while intermediary-based products have become even more prevalent in this sector.

Overall, the number of buy to let lenders has increased from 56 to 63, with 15 lenders operating through intermediaries, 18 distributing directly and the remaining 30 lenders servicing both channels.

Mr Whittaker explained: "The issue is that as of quarter three, the average yield on a buy to let is now 6.3 per cent. Once it goes above six per cent you have got to say there is a mismatch between yields and capital value."

Many people have speculated that rents have got too high or property prices have gone soft but Andrew said it is probably the latter.

However, such is the degree of rental demand that it is not right to split the observation equally between rent demand and purchase price, as rent demand is outstripping capital supply.

He added that, with property prices being "soft", a figure over six per cent on buy to let is not sustainable in the longer term.

"While it is attractive for landlords to lump in, it will be determined by that landlord's view of the market and the region," Andrew concluded.