Buy-to-let becomes the preserve of the wealthy

The Royal Institution of Chartered Surveyors (RICS) has noted changes in the buy-to-let market, which is sees as becoming the preserve of the wealthy.

Both rises in interest rates and changes in lending criteria are making property purchases difficult for the modest investor.

Typically, prospective purchasers now need around 30% of a property’s value in cash, compared with 8% in 2002.

The average deposit now amounts to £65,600, as compared to £10,100, in 2002.

In addition, some lenders need to be convinced that the rent on any prospective buy-to-let property will exceed 125% of the monthly mortgage payment.

According to David Stubbs, RICS senior economist, “Would-be investors who have missed out on the impressive returns of previous years are now finding the hurdles to property investment are higher than they imagined.”

However, he believes that existing landlords should be able to use the equity in their current properties to expand their portfolios.

The buy-to-let mortgage market has grown strongly since specialist landlord mortgages were launched in 1996.

By June 2007, the value of buy-to-let loans totalled £108 billion and investors seem as keen as ever, despite fears about interest rate rises, falling property prices and an oversupply of newly-built flats in some areas.

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