Last year saw a rise from 4.4% to 18.2% in the proportion of buy-to-let mortgage enquiries of the total mortgage marketplace. Ironically for George Osborne, this had a direct impact on first time buyer enquiries as they fell by 3.7% annually to 23.5%.
It would seem for now at least, that the buy-to-let market has “gained a chokehold” over first-time buyers, as many struggle to get out of rented accommodation and on to the housing ladder.
With the Stamp Duty deadline looming, buy-to-let enquiries as a total percentage of the market have increased considerably from the start of this year, with year on year growth of over 16% and a 62% increase compared to December.
The main reason why the BTL market remains strong, especially in London and the conurbations, is because it is one of the few ways that solid yield and capital growth can be secured whilst interest rates remain so low. Anyone reading my post on bank deposits will already know about this.
I would also argue that The Chancellor continues to not think his policies through properly. Offering Pension Freedoms last year only provided the flames to the already dry tinder box. This policy facilitated pension fund values to be used to acquire buy-to-let properties.
Good UK property stock is limited, and whilst it remains so, its premium, subject to location, is strong.
Over the past 20 years I have seen spiralling property values move out of the price range of first-time buyers earning good combined salaries. This has meant that lenders have had to be more flexible with their lending multiples. This is not a good thing as it encourages borrowers to borrow to their maximum level of affordability, and to expose them to future inevitable interest rate rises.
With the introduction of The Mortgage Market Review last year, this lending strategy has been reined in. But this is to the cost of the first-time buyer.
It will be interesting to see what happens after April 1st.
I am predicting that the damage has now been done to the property market by George Osborne’s Pension Freedoms decision. Only building affordable homes will improve things for the first-time buyer now as investors will just ‘price in’ the increase in Stamp Duty and the reduction in tax relief on mortgage payments.
High yielding properties offering solid capital growth will continue to be appealing to the retired whilst interest rates are low and uncertainty remains in the Global equity markets as to where to make a solid and reliable profit with minimal risk.
Rowena ChowdreyPhotographer at Depth of Vision