Thursday 25 February 2010

Prospects For Buy To Let Property In The UK In 2010

Most UK buy-to-let investors will be glad that 2009 is now over, especially those who got into the market in 2008. By the middle of the year the market had become unrecognisable:


-the number of buy-to-let mortgage products had shrivelled from thousands to less than 100
-the maximum loan-to-value went from 85% to 75%
-the number of lenders reduced to a handful as many went bust or withdrew from the buy-to-let market
-lenders who remained in the market became very fussy indeed about who they would lend to
-property prices dropped significantly especially for new build apartments which the majority of recent investors had opted for, leaving remortgages to release equity almost impossible
-developers had all piled into the one and two bedroom new build apartment market, leading to over-supply, resulting in all lenders bar two or three deciding that they would no longer lend on such properties.

The immediate consequence of this was that many landlords got cold feet and bailed out of the market, those who did not often ran into cash-flow difficulties as the level of voids increased.

But what of 2010? In many ways the main issue in 2009 was that it was a year of adjustment with constantly moving goal posts which made it difficult for property investors to be confident of what would happen with any particular property which they decided to buy. Everything became unpredictable and deals took longer and longer to take through to completion. By the end of the year, and certainly in the last quarter, conditions had settled, even if far from satisfactory or conducive to a healthy buy-to-let sector. 2010 should therefore in some ways be easier in that investors will take on deals in full knowledge of the what they are up against with lenders and the mortgage products available. They will not be stuck in the middle of deals with conditions suddenly changing around them almost daily.

There are still challenges on the horizon however:


-lending is still restricted. The Council of Mortgage Lenders has announced that December lending was lower than November
-major buy-to-let lenders are tightening their lending criteria. Lenders with a 999 (perfect) credit score with the major ratings agencies are finding their mortgage applications turned down as lenders take a closer look at affordability, income and outgoings
-more and more lenders are asking to see proof of deposits, thus making it harder to complete on deals using creative financing methods
-national average property prices may not have bottomed out. Lenders are sitting on a massive stock of repossessed properties which they will have to sell at some point, which will increase supply and push prices down. It is the current lack of supply which is underpinning the clear but weak increases in property prices over the last few months.

How can prospective property investors stack the odds in their favour? I will deal with this in my next article, but in the meantime, get a copy of your credit report and ensure that it is factually correct and if you do not like what you see, get to work on improving it. I will give you some tips on how to do that in a subsequent article also.

Niall Mellors is a Chartered Accountant and experienced UK property investor and host of the Southampton Property Investors Network (Southampton PIN) event. He has also undertaken substantial personal development training to give him the mindset necessary to successfully invest in property. If you have property to sell in the UK then please visit his website at http://www.knightwoodproperties.co.uk to see if he can help.

Article Source: http://EzineArticles.com/?expert=Niall_Mellors

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