Perfect conditions for buy-to-letters
8 January 2009
The current economic climate has created an ideal time to kickstart the buy-to-let investment market, according to one of Edinburgh’s leading letting agents.
Braemore Property Management believes that the recent cut in the base interest rates, combined with a lack of competition in the housing market, has created the perfect conditions for people to move back in force into buy-to-let.
One estate agent in Edinburgh is already reporting that they are seeing property investors start to come back into the market and, as interest rates are expected to fall further over the coming weeks, more are predicted to follow.
Braemore Property Management, which is based in Dundas Street and has a portfolio of around 850 properties worth more than £250 million, says that property purchase should now start to figure high again on investors’ radars, as buy-to-let mortgages are still available and there is a high level of demand for rented accommodation.
And it adds that, as the stock market remains very unpredictable and savings accounts are suffering from low interest rates, purchasing property has become the best way of having a secure, long-term investment.
William Frame, chairman of Braemore Property Management, said: “There have been a lot of claims recently that the housing bubble has burst and that if you enter the buy-to-let market, you’ll suffer from negative equity or have your properties repossessed.
“But this is not the case in Edinburgh. Buy-to-let mortgages are still available and they actually represent a far more stable investment than putting money into the stock market.
“With the recent cut in the base interest rate to its lowest level since the 1950s and the fact that house prices have fallen from last year’s heights, there has never been a better time to invest in property.
“In recent months, there has been a rise in demand for rented accommodation in Edinburgh and we are seeing more would-be first-time buyers taking on longer leases rather than considering purchasing a property of their own. It is the perfect scenario for buy-to-let investors to take advantage of.”
William adds that although the maximum buy-to-let mortgage is currently 75%, it means that investors will have to put down higher deposits on their properties.
But he says that those with funds available to invest tens of thousands of pounds into property will be able to reap the long term rewards.
He added: “In the past, it’s been easy for anyone to enter the buy-to-let market but we’ve seen a big change in recent months. The banks will no longer give 100% mortgages and we’re back to a situation where it is only those with savings and funding behind them who can invest in a buy-to-let property.
“For example, if you bought a two or three-bed flat in Edinburgh for £175,000, you’d expect to get around £600-£700 in rent from your tenants. However, with mortgage rates currently just under 6%, this wouldn’t cover your monthly repayments.
“If however, you took money out of your savings account and put down a bigger deposit on the property, it’s easier to make money on your investment. Monthly rents will cover your mortgage repayments and, with property prices expected to recover and rise again over the coming years, you’ll make money on your investment when the time comes to sell up.
“We are also witnessing the inter-bank Libor rates dropping, while the base interest rate is predicted to fall further over the coming weeks and months. It means that investing is likely to become even more profitable in the future.
“There are still a lot of potential investors in Edinburgh who have money available to put into property and, as long as they understand that it is a long term investment rather than a way to make a quick buck, they will be able to take advantage of the current conditions.”
According to some solicitor estate agents in Edinburgh, investors are already being tempted by the favourable buying conditions and some have started to buy properties. Experts also believe that more will enter the market over the coming months.
Scott Brown, estate agency partner with Warners - the leading property solicitor in terms of property listings, property sales and total sales value in the ESPC - said: “In recent weeks, we have seen quite a bit of activity from investors who, until now, have been waiting for the right conditions to arise before making a purchase.
“Some of them have now started to enter the market, as they know that there is less competition among buyers and they are more likely to get their first choice property.
“The recent interest rate cut and ongoing Stamp Duty freeze on properties below £175,000 – along with the fact that demand for rented accommodation is still quite high in Edinburgh - has also made buy-to-let investment very appealing to those people who have adequate funds already in place to make a purchase.
“I expect even more investors to start turning to the housing market over the coming months and taking advantage of the good conditions for purchasing property.”
If you would like expert help to find and to purchase buy-to-let investment properties in London, the Home Counties or in the South of England, please contact BDI Home Finders UK by calling 0845 603 6110 or contacting us by e-mail.
