Friday, Jan 22, 2010
Down?
Times: Where next for buy to let?
Contrary to expectations, new-build city centre 1 bed flats offer the highest yields. Exclusive analysis for The Times from the estate agent Savills shows how the decline in house prices since 2007 has driven up the headline yields in areas such as Nottingham, Merseyside and Manchester.
But just as banks are easing restrictions on owner-occupiers, they are increasingly tight-fisted when buy-to-let investors apply for funds. Aspiring investors are being thwarted by banks and building societies, who refuse to lend unless applicants can show a rent that will generously cover mortgage payments. These lenders risk overlooking the new two-tier market in which sought-after homes in key areas have recovered to boomtime highs and will continue to perform well .
7 Comments
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1. little professor said...
2. mark wadsworth said...
"Contrary to expectations, new-build city centre 1 bed flats offer the highest yields." ???
Tis is EXACTLY as expected. Rents are usually very stable, but prices go up and down like a yo-yo. Ergo, if rental yields are 4% and the price drops by a third, the yield rises to 6%.
When I got into BTL in the late 1990s it was easier, you worked on the basis of 12% yield which made the maths very easy - if you were looking at a flat that would rent out for £500 pcm, then as long as it cost £50,000 or less, you were quids in (i.e. times the monthly rent by 100 to tell you what the upper price limit was).
3. This comment has been removed as it was found to be in breach of our Blog Policies.
4. cynicalsoothsayer said...
"These lenders risk overlooking the new two-tier market in which sought-after homes in key areas have recovered to boomtime highs and will continue to perform well ."
Ponzi scheme ramping.
5. jack c said...
For the buy to let brigade there has never been any real focus (in my experience) on yield/retal income - a simple get rich quick scheme based almost entirely upon capital growth derived from the misguided belief that residential property prices only ever go up. There are still a lot of people (and indeed institutions) out there who have yet to get badly burned in the BTL fiasco. See the following www.mortgagestrategy.co.uk/regulation/news/mortgage-fraud-losses-hit-£1bn/1005401.article
6. doom&gloom said...
"Aspiring investors who would prefer to focus on potential capital gains over the long term are being thwarted by banks and building societies, who refuse to lend unless applicants can show a rent that is large in comparison to the property’s value and will generously cover mortgage payments".
They state this as if it is a bad thing. There underlying assumption throughout the article that house prices will soon continue their inexorable rise after this short blip is reckless. The Times can s0d off with its BTL/house price agenda.
7. timmy t said...
This is a complete non-story... Of course if prices go down then yields will rise. The whole purpose of this article is, as pointed out by cynicalsoothsayer, for Savills to (not very) subliminally try and convince people that the top end of the market is booming.