Tuesday 13th November 2007
Entering the buy-to-let market is becoming evermore difficult, according to a survey conducted by the Royal Institution of Chartered Surveyors (Rics).
The industry body claims that a 30 per cent deposit - which would be enough to secure a buy-to-let mortgage - currently averages £65,600.
Affordability in the sector has become some 500 per cent worse in the past five years, Rics notes.
Previously, in 2001, a deposit of £10,100, or eight per cent of the average house price, would have been enough to enter the investment property market.
"It takes more capital than ever to set up a buy-to-let investment," comments senior economist David Stubbs.
"Would-be investors who have missed out on the impressive returns of previous years are now finding the hurdles to property investment are higher than they imagined."
But for existing investors the picture is less bleak, he asserts, as existing equity in houses can be used to help obtain more lending in the future.
This could help to buoy the buy-to-let market through the current tightened credit market, Mr Stubbs predicts.
Meanwhile, Rics expects strong rises in rents throughout 2008 but anticipates that house prices will remain largely flat over the coming year.
As a result, the yields which may be obtained from investing in property could increase.
With a decrease in the base rate of interest also widely expected in the coming months, buy-to-let investment is deemed an "attractive proposition for many".
The current base rate of 5.75 per cent remained unchanged this month, the fourth month in a row that the Bank of England has left rates untouched.
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