Money News
Latest data (Q1) on the buy-to-let housing market from the Royal Institution of Chartered Surveyors suggests that easy investment returns may be a thing of the past. The RICS Lettings Survey shows tenant demand faltering while property sales have increased in response to a reduction in employment growth.
The findings come against a backdrop of cheap credit and a booming housing market that has created increasing numbers of buy-to-let investors in recent years. And with many of these same investors now sitting on sizeable capital gains some are taking the opportunity to cash-in.
New landlord instructions (an indicator of buy-to-let activity) fell slightly in the quarter to April - 7% more Chartered Surveyors reporting a rise in landlord instructions compared to 10% in the previous quarter. The fall in activity has been driven by a continued reduction in yields and signs that underlying house price growth is beginning to slow.
Meanwhile, the percentage of landlords selling their properties jumped more than a percentage point to 5.2%, the highest level in two years. Many landlords are selling into a tight housing market in light of falling gross yields and rising borrowing costs.
Gross yields fell for the third consecutive quarter, with the pace of decline accelerating at its fastest rate since July 2004. The sharp fall in yields reflects strong house price inflation coupled with slowing rental growth as tenants baulk at paying.
And with falling yields operating in tandem with rising interest rates many landlords will likely have seen their operating margins impacted. For some it may have been enough to sell up and book a nice capital gain.
30 May 2007 © Moneyextra.com
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