Buy to let lending in the UK has fallen in the first quarter according to new data from the Council of Mortgage Lenders. According to the report buy to let investors borrowed £3.7 billion in Q1, representing a fall of 5% over Q4 2011.
The likely cause is that "investor demand has not proved immune to the renewed recession, tightening credit conditions and declining sentiment about the potential for further sharp gains in rents", said analysts at Capital Economics.
The drop is surprising, because the UK rental market continues to look incredibly strong, especially in London. Having said that the LSL Property Services Buy to Let index showed rents declining month on month in February and March by 0.6% and 0.3% respectively. As a result, while rents continued to rise on an annual basis the growth is slowing, with year on year growth at 3.5% in February and 2.7% in March.
Returns are growing though. According to the LSL index landlords made average returns of 3.5% in the year to end February 2012, but in March the average return had grown to 5% – the highest since December 2010.
Representative of the continued strength in the sector is the fact that its market share of loans increased in Q1, with buy to let loans accounting for 12.8pc of the total value of outstanding mortgages at the end of the first quarter, up from 12.6pc at the end of 2011 and 12.2pc the same time a year earlier, a trend which is expected to continue.
"The lettings market is the only area of the property market that is growing and this doesn't look set to change in the immediate future," said Tracy Kellett of buying agents BDI Home Finders. "There's still a shortage of stock, and until this is rectified rents will remain high."
- Monday 14 May 2012