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Buy-to-let market remains strong

Wednesday, 4 June 2008 12:00 AM

Buy-to-let lenders have spoken to defend the sector, claiming it remains in a "strong position" despite the growing perception of turmoil.

The UK's biggest buy-to-let lender, Bradford & Bingley, this week released a profit warning to the financial markets, announcing it had slipped £8 million into the red during the first four months of 2008.

This compares to a figure of £108 million profit for the four months to April 30th 2007.

Bradford & Bingley blamed the change in fortunes on an increase in arrears in its buy-to-let mortgage portfolio, and will accept substantial investment in the company from Texas Pacific Group (TPG) in exchange for 23 per cent of the company.

However, the market remains buoyant according to specialist lender Assetz, despite the perception created by these events.

"The buy-to-let sector remains firm, with established landlords continuing to benefit from strong and rising rental demand," said Stuart Law, chief executive, Assetz.

"While a number of amateur landlords may be struggling with new mortgage payments, they make up a very small proportion of the market and they will already be beginning to benefit from increasing rents.

"As a result, I would expect to see arrears begin to fall in due course."

Demand for rented property is set to increase with continued uncertainty in the housing market. As buyers adopt a 'wait and see' attitude to average prices, they remain in the rented sector and increase demand.

Furthermore, research from the Department for Communities and Local Government (CLG) finds the UK needs some 50,000 more rented properties annually.

"Experienced buy-to-let investors are in a strong position to weather the current storm and to benefit from the increase in demand for rented accommodation," continued Mr Law.

"The current negativity has resulted in a significant fall in the number of first-time buyers entering the market over recent months, with many expected to stay away over the short term.

"As a result, strong rental demand is set to continue, providing good news for landlords," he concluded.

Chris O'Toole

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