Almost two-thirds of letting agents believe there are too many buy-to-let properties on the market. This claim has been backed by figures which indicate 98% of agents in London report more properties than tenants.
The findings, which come from a survey compiled by the Association of Residential Letting Agents (ARLA), also indicate the average rental return in the South East has fallen from 7% to 6.5%.
Commenting on the findings, John Crossley, chairman of ARLA, said: ‘This is a snapshot of the buy-to-let market. It shows investor landlords have made unexpectedly high capital gains at the expense of high yields. High yields are not a feature in a low inflation, low interest rate economy. Although buy to let represents less than 10% of all rentals ‘ and there is still scope for investment in the private rented sector ‘ investors must take proper advice from letting agents and financial advisers before making decisions.’
According to the ARLA survey, 77% of agents believe a loss of corporate and overseas tenants from central London has led to a stagnation in the capital.
Crossley said: ‘The market in prime central London is still in the shadow of the dotcom bubble bursting and the terrorist atrocities of last September.
‘Buy to let is one of the few investment markets where asset values continue to rise when yields drop. Nowhere is this more evident than in the central London property market. Remember, buy to let is a long-term investment so that it can take account of all the market variations,’ Crossley said.
Although the buy-to-let situation in London appears close to saturation, Ray Boulger, senior technical manager at Charcol, believes there are still opportunities in other parts of the country.
He said: ‘There has been an over-supply in London for a while, but in other areas of the country demand is still strong. We are still getting plenty of landlords wanting buy-to-let mortgages to increase their portfolio.’
However, he did warn potential investors to investigate the market before making a decision to enter.