Trends in buy to let

There is an interesting article here on buy to let mortgages (which will be 10 years old this summer) which shows that they are highly successful and indeed less risky (for the lender) than residential mortgages as only 0.68% are in arrears of more than three months, compared to 0.97% of normal loans.

Buy to let mortgages now account for 8% of the housing stock in the UK and the buy to let market is worth over £73 billion. However the average property portfolio is still fairly small although it has apparently has increased from three per landlord in 1996 to seven this year, and research has revealed that 83 per cent of landlords plan to increase or maintain their portfolios in the next six months.

However in the future this dominance of the market by small investors may change. This article in the Times indicates that larger investors, such as pension funds, looking for a steady income flow, may be looking to increase their investment in this area. We could be also looking in the future at considerably more ‘build to let’. This is common in Germany, Holland and several other European countries, where many people live for years or even decades in blocks of flats owned by banks or other financial institutions, but is fairly rare in the UK.

The disincentive for the larger investors may be that residential property is management intensive - finding tenants, chasing rent arrears, dealing with repairs - and the large city investors (suggest the Times) would not want to be directly involved in this work.

However there is no doubt that residential property has proved itself over the past 10 to be a sound investment and no doubt will remain popular, at least with the smaller landlord, and possibly also with the big boys.