Landlords have been warned there is a danger of market saturation in the rental market – so investors should purchase with caution.
Lucy Morton, senior partner and head of lettings at Central London estate agents W.A.Ellis, said: "The reported buy-to-let boom is positive news for the UK property market, however, there is a danger of market saturation, and we would urge investors to purchase with caution.
"In prime central London, it is a well-known fact that yields are low as rents have not risen at the rate of the capital values. In fact, rents overall have fallen on average by circa 2.5% since the beginning of the year as currently supply outweighs demand. It's the poor quality properties that are sitting on the market, and this is obscuring the price and void period statistics. It is absolutely essential that properties are priced correctly and presented in their best possible condition as newly refurbished flats and houses that are of a high standard are still achieving record breaking rents.”
The warning comes just days after it was announced that lending to landlords was at its highest in five years, and more than 30 per cent higher than last year.
According to figures from the Council of Mortgage Lenders, about 40,000 buy-to-let mortgages were advanced in the three months to June, up from 33,000 in the first quarter of the year. The figures prompted debates in some national newspapers that buy-to-let was fuelling a house price boom and preventing first-timer buyers from purchasing their first property.
“Bearing in mind rental yields and supply and demand, prime central London's buy to let investors should take a long term view, particularly focusing on capital growth,” said Morton, “We would also advise buying a modern, newly refurbished property in order to ensure it lets well. Another important factor when purchasing is to ensure that the rent being quoted by the selling agent is actually achievable - buyers should check with an independent source."