Despite being a year of widespread negative sentiment on the housing market, 2005 was another strong year for the buy-to-let market, says Paragon Mortgages.
Conditions in the first half of the year were challenging, with falling confidence in the housing market as a consequence of increased interest rates and general concerns over value and affordability. The second half of the year however, saw improving landlord confidence.
John Heron, managing director, Paragon Mortgages says: “We’re clearly now in a more buoyant phase for landlords. The market has proved more resilient than many expected, and we are definitely seeing a buy-to-let bounce. This is, to a significant extent, the result of lower financing costs following interest rate reductions earlier in the year. This has enabled investors to borrow at very competitive prices, either on a fixed or variable rate basis, feeding through into the recent resurgence of activity.”
Heron says, heightened public concern about the growing pension crisis has undoubtedly had a positive effect on the buy-to-let market. He points to a recent Royal Institution of Chartered Surveyors lettings market survey, which shows landlords are holding onto their properties for the long term, viewing their investment as a significant part of their pension plan.
Paragon says demand for private rented property is expected to rise over the coming year, assisted by the record number of students in higher education and the number of people migrating to the UK, boosted by EU enlargement. As a consequence, activity levels should improve as landlords take advantage of this increase in demand by expanding their investment portfolios. Parargon’s buy-to-let trends survey also suggests landlords expect the net value of their investment portfolios to grow by 5% over the next 12 months.
Heron adds: “In numerical terms, property investors expect to grow the size of their portfolios over the next twelve months, from the current 11.8 to an average of 12.2 properties. The cool-down in the housing market over 2005 may have driven away the speculative investor, but informed, professional, buy-to-let landlords remain committed to their investments. While these landlords will doubtless remain cautious over the coming year, they will continue to build their portfolios and to benefit from attractive long term returns.”IFAonline
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