Reports are rife that inexperienced landlords have begun to leave the sector as lenders tighten their criteria. As a result, new landlords and those with small numbers of properties – commonly one or two holdings – are leaving BTL as fears of price falls escalate.
According to one property website, landlords have begun to panic-sell as the turmoil in the financial market is expected to continue. A recent survey by the Royal Institute of Chartered Surveyors (RICS) reported that sales of BTL properties were at their highest for two years in Q2 2007.
Landlords are facing rises in capital values and rental yields are falling, and are as low as 4 per cent reported in London and the South East.
Nigel Terrington, chief executive of Paragon, said: “In the main, landlords are shrewd investors and business people who handle their assets with skill. Our index has shown that rental yields have remained stable for over a year, but borrowing costs have risen substantially. In addition to increasing rents, landlords have lowered their portfolio gearing and consequently kept net returns fairly stable too.”
Lee Grandin, managing director of Landlord Mortgages, said: “The current lack of movement in the markets is putting landlords into a quandary. A large number are opting to wait in the wings and see what will happen in the buy-to-let markets – investors will stay put until they have a reason to move.”
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