Banks are making it almost impossible for new entrants to
the buy to let market to obtain a financially viable
mortgage. The credit crunch is hitting lenders hard and in
response, they are hitting the buy to let landlord even
harder. The number of mortgage products available has
decreased by almost 75% since April 2007 and this decrease
shows no sign of stopping there.
HBOS, who is the owner of a number of lenders including the
Bank of Scotland and the Halifax, to name just two, has
recently taken steps to effectively price itself out of the
buy to let market. The other big lenders seem set to
follow suit and "shut up shop," for all but the most risk
free investments. They seem set to abandon the buy to let
investor until the property market shows serious signs of
turning around.
The rates that are being offered to UK buy to let landlords
are becoming so unattractive that it is causing many to
either seek a buyer for their portfolio or decide to hold
and not consider buying any new property or refinancing
their current portfolio until things get back to some form
of stability.
Banks seem to have made a conscious decision to effectively
price the novice or first time landlord totally out of the
buy to let market. They are doing this by asking for
larger deposits and changing rates to be so high that it
makes it almost impossible for the first timer to see the
value or profit in investing.
What are the options currently available to investors?
1. Many investors are now looking more seriously at buying
overseas properties
2. Investors are holding onto their properties and not
buying any more and not refinancing their current portfolio
until the economic climate changes.
3. As an alternative to investing in buy to lets, investors
are turning their hand to developing properties instead.
4. Investors are putting their money into other potentially
lucrative investments; in particular some are trying their
luck at venture capitalism.
5. Investors are having to travel further than their local
community and really seek out the undervalued properties,
that can still be found in certain parts of the UK. They
are then getting themselves the best mortgage deal they can
and sitting it out until the market turns around and they
can refinance to a better rate and draw out some equity.
Is there any good news?
For the experienced UK buy to let landlord who has a
surplus of cash, there are some great bargains to be had.
There is less competition at the moment, which means that
those investors that have the cash and the knowledge to
weather this storm are in a very strong position.
Home owners that have to sell their home are finding it
difficult to sell. Hence, the opportunity for investors to
pick up many BMV properties that previously they where
finding it difficult to get their hands on.
At the moment surveyors don't seem to have a grip on what
the real current market value of property is and in certain
situations this can open things up for the discerning
investor to pick up a bargain.
Any property investor, including the first time investor,
that is prepared to do double the work to find the bargain
properties and then is prepared to live with perhaps a
couple of years of higher mortgage rates, in a few years
time when they refinance, will potentially see huge gains.
The bottom line is that while many analysts are predicting
doom and gloom, there are always those landlords that will
thrive in adversity.
The question all investors, new or old, have to currently
ask themselves, is do they see opportunity or just a black
hole in the current buy to let market place. If it is a
black hole, then they are destined to find life difficult
over the coming months; however, if it is opportunity, then
they maybe amongst the few investors that thrive and
actually love this kind of uncertain property market.
Lenders do seem to be abandoning the large majority of UK
buy to let landlords; yet, what they are also doing,
perhaps unintentionally, is separating the men from the
boys, the strong from the weak, the experienced from the
novices and the low risk investors from the gamblers.
----------------------------------------------------
Carlton Johnson is a well respected author, investor and
webmaster. To learn more about how to be a successful
landlord in the UK visit the
http://www.investment-property-guru.com website, for all
the latest investment property tips and advice.
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