Buy-To-Let Article by Martin & Co Letting Agents in Cambridge - Nov 09
As we approach the end of 2009, optimism is returning to the buy-to-let property market. Small yet positive developments in mortgage availability, coupled with increasing numbers of cash investors is bringing buy-to-let back to prominence. And while nationally, many areas continue to suffer from a lack of buyer confidence, Cambridge is emerging again as one of the more promising and active investor hotspots.
Buy to Let Mortgage Availability
One of the most critical factors for buy-to-let landlords is the availability of finance. Recent figures from the Council of Mortgage Lenders show that the buy-to-let mortgage market grew for the first time in 2 years, showing a 10% quarter on quarter rise in the three months leading up to September 2009. While this is a very positive indicator for the future, looking at the state of the market now compared to 2 or 3 years ago - this growth is in fact still very modest, and it is said that landlords will still require a minimum of 20% equity to stand a chance of remortgaging at the end of their fixed term.
Rental demand is key
The lack of available finance is however a double-edged sword for buy-to-let investors. While it can stifle portfolio re-mortgaging and expansion plans, it also acts as one of the major drivers of rental demand, as it contributes to an increasing population of prospective tenants. In Cambridge, which is geographically small, and has a disproportionately high population turnover of short-term residents - investors can enjoy the security of knowing that solid rental demand is here to stay. And although the supply of property received a boost in recent years with a number of large residential developments built in the city, the supply of new housing stock is still more restricted than in many other parts of the UK. And so in contrast to many former 'investment hotspots', supply in Cambridge is unlikely to adversely outweigh demand while the local economy and employment market holds its own.
Cash Buyers Move In
The recent increase in buy-to-let investment has been boosted by a sharp rise in the number of cash investors. This shift can be attributed to the fact that more traditional investment vehicles, including savings accounts, have become a less attractive option as interest rates look set to remain low for some time. The Association of Residential Letting Agents (ARLA) Q3 Survey of Residential Investment Landlords reports that more than 40% of landlords believe that investors are being tempted back into the market because of minimal interest on savings, with only a quarter of respondents disagreeing, and a third unsure. During the credit crunch and ensuing banking crisis, while many lost money; more lost confidence - in particular in global stock market investments, with many choosing now to bring their financial assets - quite literally - closer to home. As a result, 'bricks and mortar' has come back to being perceived as one of the more secure options available to medium and long term investors.
Figures Stack Up for Investors
In Cambridge, buyer demand has picked up again, and while in some areas agents report a nominal rise in actual sale prices, the city continues to hold promising investment opportunities and attractive rental yields. For the most part, sale prices remain at a significantly lower level than during the height of the market in 2007. Whether prices have in fact bottomed out for good, continues to be in hot debate in the industry. Regardless, for many investors during the downturn the sums have continued to stack up, and in October, The Association of Residential Letting Agents ARLA reported that overall this year, landlords have continued to increase their portfolios sizes, with the average portfolio up from 6.3 to 7 in less than 12 months. Looking ahead, ARLA reports that a third of its Q3 survey respondents expect to acquire new investment properties over the next 12 months, with a quarter of respondents undecided.
By Nick Diggle, Director, Martin & Co.
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About Martin & Co Cambridge
The Cambridge branch of Martin & Co is a licensed member of the National Approved Letting Scheme (NALS), a government-backed organisation set up to maintain proper standards of professionalism, best practice and compliance in the UK lettings industry. The Cambridge office is also registered with The Property Ombudsman and uses the government-appointed Deposit Protection Service (DPS) for all tenant deposits. For best practice the Martin & Co Cambridge office has its accounts externally audited every 6 months and holds all client monies in a ring-fenced client account, with full client money protection in place at all times. Martin & Co UK Ltd holds Investor in People status, and runs a year-long internal training academy, with both internal and external consultants and trainers from ARLA and the NAEA.
This article was printed in Business Weekly on 19.11.2009 and is available online here: http://www.businessweekly.co.uk/singleimage/36074-buy-to-let-investors-return-to-cambridge-property-market
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