There is no doubt that the buy-to-let market is about to face some challenging years. If you were to believe everything you read in the press about investment property you might think the entire property market was about to collapse under the weight of buy-to-let repossessions. Thousands of would be property millionaires have collectively lost millions of pounds due to poor investment decisions in recent years but many more investors have become substantively wealthy.
The buy-to-let market is not all doom and gloom, which what certain elements of the media will have you believe. It is true that there is an oversupply of inner city apartments in many urban areas around the country. The lack of tenants to fill the apartments, many of which were bought off plan by first time investors, has pushed rent prices down and forced many buy-to-letters to succumb to repossession, sell up, or make up the cash shortfall out of their own funds.
However, this unfortunate situation is not prevalent throughout the entire country. Outside of the major urban areas which are awash with vacant apartments, the buy-to-let industry is still strong. This is evidenced by the fact that lenders are willing to approve buy-to-let mortgages for properties located in areas that are not city centers. Although the total number of buy-to-let mortgages has been slashed in recent months, there are still plenty of products available for the millions of high quality rental properties scattered through the UK.
If this is as bad as the crisis will get – if it could be called a crisis at all – then it is likely the buy-to-let industry will weather the storm. There is no doubt that the property market in the UK is experiencing a price correction for owner-occupied homes as well as investment properties, but it could hardly be called a crash. It is likely that property prices will remain fairly stagnant for a few years and begin to rise again once the financial market sort out their problems.
During this period the availability of buy-to-let mortgages may continue to suffer. It is unlawful that lenders will flood the market with mortgages for investment properties as they have done in the past even when the turmoil in the credit market subsides. Lenders should begin to reverse the trend of pulling products from the market in the near future and will slowly release new buy-to-let mortgages as their confidence in the property investment industry returns.
Even now, in the midst of the worst downturn in the financial markets for decades, there are still high quality investment properties available on the market and the means to finance them. As with all business decisions, astute investors will be able to locate these properties through careful research and will be able to secure buy-to-let mortgages by presenting robust business proposals to lenders and chipping in an amount deposit.
Lenders are still keen to secure their products against investment properties, though they are currently more savvy with which they approve buy-to-let mortgages to than they were a few years ago. The next few years will be unpredictable and challenging for the property investment industry, however all signs point to it being up to the task.