Buy-to-let too expensive for average investor
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by Kay Mitchell
A new report by the Royal Institution of Chartered Surveyors (Rics) has established that buy-to-let could grind to a halt as it is becoming too expensive for the average investor.
Rics said a demand for higher deposits and increasing interest rates has meant that investing in buy-to-let has become unreachable to the average person. Rics said would-be buyers must now secure a deposit of 30%, up from 8% in 2002.
Buy-to-let has increased rapidly in the last few years. In 1996, when specialist landlord mortgages were introduced, only 20,000 were taken out. However, by June this year, there were 940,000 outstanding buy-to-let loans, worth Â£108 billion.
David Stubbs of Rics said it takes more capital than ever before to set up a buy-to-let investment. Mr Stubbs added potential investors who have missed out on the impressive returns of previous years are now finding the hurdles to property investment are higher than they imagined.
But while landlords who have invested in buy-to-let over the long and medium term have seen strong gains due to property price increases, those venturing into the market now struggle to make ends meet.
The National Landlords Association (NLA) says while a slowdown in the property market could benefit existing buy-to-let owners, with more demand for rental property, newcomers should do their research.
David Salusbury of the NLA said it is uncertain as to whether property prices will rise or fall over the 12 months and those who are buying a property to let as someoneâ€™s home need to have a medium or long-term approach.
Recent data from the National Landlords Association (NLA), 23.4% of landlords plan to increase the number of properties in their portfolio over the next 5 years.
Finally Moneygate, the financial services organisation, said there is a growing amount of people seeking rented accommodation after mortgage lenders are becoming much stricter on who they will lend to. Consequently, an increase has been noted in potential buyers having their mortgage applications denied and landlords are reaping the benefits by renting their properties to these people.
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