Buy-to-let investors prepare to swoop on housing market downturn
If house prices fall, investors can pick up properties with higher yields, especially as rents are unlikely to fall as much as sale values.
The UK property market is in limbo: sales are on hold, landlords are struggling, and mortgage searches last month were down 44pc on the previous four-week period, according to the online provider Twenty7Tec.
But some buy-to-let investors are spotting opportunities, and are getting their deals lined up for when the restrictions on purchasing are lifted. The share of buy-to-let mortgage searches on Twenty7Tec saw a small uptick last month. In the capital, prospective investors are “circling”, said Camilla Dell, managing partner at London buying agency Black Brick. “There’s a lot of cash swirling, looking to swoop in,” she said.
While analysts are not anticipating a house price crash, they are forecasting some falls in the short term. The latest survey by the Royal Institution of Chartered Surveyor suggested sales expectation in the following months are the lowest ever recorded.
Savills has forecast a short-term price drop of 5-10pc. “You need only look at the rate that lenders have pulled out their mortgage offering,” said James Tucker of Twenty7Tec. Nearly a third of the mortgage deals on offer have been retracted.
For buy-to-let investors, short-term price falls mean long-term yield increases. In London and the South East, high property prices have meant low yields, leading to an exodus of buy-to-let investors to the North, seeking higher returns. But falling prices have already been boosting rental yields.