However, amid all this depressing news, there is one shining star – the buy-to-let market.
In this time of uncertainty, landlords are putting their faith in bricks and mortar and expanding their portfolios.
According to Paragon’s private sector trends report for Q2, on average landlords expect to increase their portfolio from 12.6 currently to 13.1 properties in 12 months’ time – the first time in two years that landlords have looked to significantly add to their portfolio.
To stave off another recession, the US Federal Reserve has promised to keep interest rates close to zero until mid-2013.
Without making an explicit commitment, the Bank of England has signalled it may follow suit. There is even talk of a cut to 0.25% to stimulate growth.
As the risk of interest rate hikes recede and funding remains cheap, landlords have greater confidence to commit to new purchases.
New lenders and established lenders have been returning to the buy-to-let market and landlords now face a wider range of choice. According to Moneyfacts, the number of buy-to-let products in July was 505 – the highest since September 2008.
With many competitive products available and a change in the computation of arrangement fees from percentage fee to flat fee model, many landlords have taken advantage of competitive rates to remortgage their existing properties.
Our data shows that more than 70% of these landlords have re-invested these funds in new rental properties.
Rental demand remains strong and booming, with recent reports of prospective tenants gazumping one another.
Landlords find themselves better able to negotiate higher rentals and quality of tenants, and mitigate the largest risk that landlords face – void periods.
To meet the increasing demands for rental accommodation, lenders need to support landlords by increasing the availability of buy-to let financing. Overly stringent criteria still limits their accessibility.
In recent years, larger landlords have been especially penalised, with a limit on the number of buy to lets they can finance with any given lender. This is a shame.
Many large landlords who have built their portfolios from astute purchases and sensible gearing are benefitting most from the current climate.
They are using their excess funds to reduce gearing or buy new high yielding properties.
As the larger landlords are the main drivers of the buy-to-let market, it is time that lenders differentiate between the types of large landlords and not tar them all with the same brush.
Ying Tan is managing director of The Buy to Let Business
