Market analyst Datamonitor has said that the boom time may be over for the buy-to-let market. In its report, UK Buy-To-Let Mortgages, it forecasts steady, unspectacular growth in buy-to-let, believing that the market will cool naturally. It expects gross advances will grow at 4.7% a year to 2006, compared with double digit rises since 1999.
The reasons given for this were interest rate increases, leading to reduced rental cover and a continued recovery in equity-based returns, reducing the attractiveness of property as an investment.
Chris Cummings, marketing director of Sun Bank, said: ‘If true, this forecast would show that the industry was maturing and that people had woken up to the fact that you can’t make a fortune out of bricks and mortar overnight. It would be good if people recognised what they were doing ‘ which is setting up a small business.’
However, the report does not forsee any sharp market corrections. Richard Cole, financial analyst at Datamonitor and author of the report, said: ‘Lenders interviewed for this research suggested that buy-to-let investors take a rational businesslike approach to their purchase, unlike people looking to buy a place for themselves. As a result, it is logical that should the property market suddenly slump ‘ itself thought unlikely ‘ few buy-to-let investors will panic into making rash short-term decisions based on a collapse in house prices alone.’