Buy to let has long been the darling of the personal finance pages but if some papers are to be believed, the tide is starting to turn as headlines announce the buy-to-let market has reached saturation point.
Case studies in the media are highlighting borrowers whose properties, bought at the height of market values, now lie empty while they struggle to pay the extra mortgage payments.
But letting agents are talking of the popularity of this alternative investment, aided and abetted by lenders which have been falling over themselves to get a share of the market by introducing new products and schemes designed to attract new clients.
So who should the buyers listen to, and would potential landlords be better off turning their backs on this market? The figures to date show buy to let stands out as an investment that has experienced steady growth and is now worth £15bn.
The actions of lenders would suggest that they believe this growth will continue; whereas specialist providers of buy-to-let mortgages were scarce initially, there are now some 70 providers with a choice of almost 300 different products.
The one factor that may be seen to affect the rental market is location ‘ reports of saturation have tended to centre on London and the South East ‘ but for those researching their choice of property carefully, there is still enough room within the market for more buy to let.
To an extent, whatever cycle the housing market follows, there is always demand for rented accommodation.
At the moment, rising house prices are hindering first-time buyers, who have to rent while they wait for property to become more affordable.
Conversely, if the housing market encounters problems and people cannot repay their mortgages, they will sell up and look to rent a property. But this type of investment is not, and never has been, for those looking to make a fast profit.
Over the medium and long term, investors need to be aware that rental yields and values will alter and they need to be able to weather these changes.
Predicting the future is impossible, but providing potential investors stick to three basic principals ‘ that of buying the right property, in the right location, at the right price ‘ they should, over the medium and long term, see their investment grow.
The housing market will inevitably slow, but there is every reason to expect buy to let will continue to prove a sustainable market initiative.
Colin Dale is head of lending at Skipton Building Society
