Buy to let consolidates

Numbers of new property investors entering the buy to let market have almost halved in the past year, figures released by the Mortgage Trust have revealed. The Trust's borrowers survey has shown that the number of new investors has fallen from 23 per cent in July 2004 to 12 per cent in May of this year.

The market slowdown has discouraged many of the purely speculative and opportunistic that had been fuelling buy-to-let growth in recent years – certainly not a bad thing for those prepared to wait for the big returns on their investments, says Mortgages for Business managing director David Whittaker.

"I think the market will thrive better for the lack of new investment companies who do not know what they are doing," he told Money Marketing. "I think you will find what is happening now is the investor who has been in for a year or two and who has been taking a bit of a holiday is now starting to get active again," he added.

The decline of part time property investment has also bought those who are prepared to stay in the market other dividends, such as more flexible and affordable mortgage lending. Buy-to-let mortgage lenders have had no choice but to ease restrictions on their products to keep property investment capital flowing, say analysts.

Buy-to-let lending criteria has fallen to as little as five per cent deposits requirements and rental interest cover of only 110 – 125 per cent, compared to the 130 per cent of a year ago.

The decline of 'armchair speculation' has also reduced the buy to let mortgage providers exposure to risk, says property investment analyst Graham Dowson, and they have been able to both loosen their criteria and pass on some of the material benefit to borrowers.

The easing of restrictions has probably reached its limits however: "there is only so much that a lender can actually relax," said Mr Dowson. Even without the ready source of capital, the market is reaching the ideal point for an investor willing to play a longer game, said Assetz managing director Stuart Law.

Mr Law said that he has increased his personal portfolio by 50 per cent in the past three months to take advantage of the "superb opportunities" available, and claimed that the firms sales have increased by five to ten per cent in the past two months.

"The negativity in the national media would make you think it is all doom and gloom but the reality is that now is the most perfect buying time," he said.