Skandia predicts exodus of buy-to-let investors

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by Gill Montia

Investment company, Skandia, is predicting that the UK private rented sector will shrink by around two-thirds over the coming years, as landlords abandon the market.

The firm expects the value of buy-to-let mortgages to fall from its end 2007 level of £120 billion, to £44 billion, as buy-to-let investors withdraw their equity.

The exodus will be driven by falling house prices, higher mortgage costs and slow rental growth.

Skandia’s chief executive, Nick Poyntz-Wright, believes these factors will force investors to reassess their exposure to residential property and that many will choose to diversify.

According to data from the Council of Mortgage Lenders, the stock of UK buy-to-let mortgages stood at £2 billion in 1998, when this type of loan represented less than one in 100 of all UK mortgages.

The boom in buy-to-let has meant that in the past decade the ratio has risen to one in ten.

However, according to financial website Moneyfacts, the number of buy-to-let mortgages on offer has drastically reduced since this time last year, from 3,478 to 528, with higher deposits being demanded all round.