Buy-to-let booms amid credit crunch

Monday, 10 March 2008 12:00 AM

The buy-to-let sector of the UK property market has continued to boom despite widespread fears instilled by the credit crunch.

According to research from the country's largest letting agent Your Move, there was a 21 per cent increase in the number of new lets commencing during January and February this year, when compared to the same period a year earlier.

The organisation's research finds, not only has the credit crunch led to a pronounced increase in tenant demand, this trend is set to continue.

"The start of 2008 has seen considerable growth in the buy-to-let sector," said managing director of Your Move estate agents, David Newnes.

"Squeezed credit and volatile mortgage rates have contributed to an increased demand for rental accommodation."

The trend has been caused by buyers delaying purchases as they wait for market volatility to pass, and remaining in the rental sector, increasing demand.

Finance has also become harder to obtain as borrowers have tightened their lending criteria following the American subprime crisis in the autumn and resulting shocks to world markets.

"First-time buyers with little or no deposit are finding it virtually impossible to secure high loan-to-value (LTV) mortgages - the days of 125 per cent mortgage are long gone," continued Mr Newnes.

"But frustrated wannabe first-time buyers still need a roof over their heads - and buy-to-let is filling the gap. The strong fundamentals are impossible to argue with."

Your Move has also registered a notable increase in the number of potential buyers looking to rent in the short term leaving landlords in a strong position to expand their portfolios.

"The demand is definitely there. The private rented sector is the out-and-out beneficiary of the liquidity squeeze. Not only do buyers have less access to credit, but those that can get it have been spooked by the negative sentiment surrounding house prices," continued Mr Newnes.

The findings confirm those of the Council of Mortgage Lenders (CML) which finds buy-to-let lending totalled £24.1 billion in the second half of 2007, up from £21.2 billion in the first half of the year and £20.8 billion in the second half of 2006.

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