Clouds on the horizon for buy-to-let owners

Conditions for buy-to-let landlords, which have been buoyed by low interest rates and strong demand from first-time buyers struggling to get onto the property ladder, are expected to deteriorate in the next few months, according to new research from insurance broker SimplyBusiness.

With hikes in interest rates anticipated, and political parties pledging to assist first-time-buyers post-election, the longer term prospects for the industry are far less certain.

“Landlords are realistic that interest rates can’t stay this low indefinitely, and are nervous of initiatives the next government will introduce to assist first-time-buyers,” said Julian Watson, landlord product manager at SimplyBusiness.co.uk.

“New build has also slowed in the recession, driving up rental demand for the existing housing stock, but as our landlords identify, the expected resurgence in this sector will also increase competition for lettings.”

Throughout the last fourteen months of the global credit crisis, only a quarter of landlords have purchased a new property to let, according to the report. Similarly, very few landlords said they expected to buy another property in the next year.

Watson said: “The recession appears to have dissuaded casual buy-to-letters from reinvesting, whilst the more professional investors continue to speculate.”

For those that are interested in investing in new property, mortgages remain scarce. Chantelle Bleasdale, managing director of mortgage advisors ClickCover, said: “We have seen a rise in the number of buy-to-let investors re-mortgaging their existing residential property to access cheaper finance than is currently available through straight buy-to-let mortgages.”

However, more than three quarters of the landlords surveyed by the report said they were optimistic about the buy-to-let market over the next 12 months. The majority also reported an increase in property prices in their areas, easing capital losses brought by the recession, and generating a higher barrier to entry for first-time-buyers – thus driving up rental demand.