The buy-to-let market is overheating as investors, fearful of dwindling pensions, turn to property, it emerged this week.
Hamptons said that sales in the market have risen by 20% in the past six months. And agents said that worries about the value of pensions combined with the volubility of the stock market have led to a record number of investors putting their money into the property market.
Richard Donnell, head of residential research at FPDSavills, said the increase in investment activity has led to a glut of houses for rent in some areas that in turn could push rents down.
“Rents will slow in areas where there is a lot of investment and a large number of people buy-to-let, as we have seen recently in Docklands. The other fear is that, if there is a significant fall in City employment, there may be a softening in demand rather than supply. However, as soon as the supply is reduced the problem is resolved. Therefore, as long as you take a long-term view, the investment should work out well. Any fall in yields should be compensated for by an increase in capital value.”
The Council of Mortgage Lenders estimates that buy-to-let lending grew by 12.5% between the first and second halves of 2000. Recent indications expect it to rise further during 2001.
Malcolm Harrison, spokesman for the Association of Residential Letting Agents, said: “Over the past five years between £6bn and £7bn has been invested in buy-to-let properties. Moreover, there is a general industry consensus that the private rental sector, which currently makes up around 11.5% of the total housing market, is set to rise to 15% over the next five years.”
Gill Lamprell at Knight Frank pointed to the expansion of buy-to-let in the regions. She said: “This year we have seen buy-to-let spread to the outer areas, rather than just prime parts of central London. This market has shown substantial growth of around 30%.”
EGi News 01/09/01
