Mortgage Clinic: 'Is it a bad time to buy a flat for our daughter?'
Wednesday 07 May 2008
This summer, I had planned to get a £275,000 buy-to-let property in Bristol, where my student daughter and her college friends will live. But I'm confused. House prices are falling, yet I hear that rents are holding up well. Is our plan terribly ill-timed? Obviously, my daughter really wants the plan to go ahead. BF, Manchester
For wealthier parents, a buy-to-let for offspring at university is appealing. While rent from your daughter's friends should cover the mortgage, there's also opportunity for capital growth.
No student worth their salt would let a parent back away easily from such a generous offer, but it's what you want from your investment that really counts.
With prices falling in many parts of the country, whether to go ahead now depends largely on how long you plan to buy for – and if you're in it solely for a swift profit.
"If you're buying for the length of your daughter's degree course, that may prove too short a term to make the investment worthwhile," warns David Hollingworth of broker London & Country. "But if you intend to keep the property longer term and let to students beyond your daughter's stay, then it could still be worth it."
Brokers stress that, like all markets, housing is cyclical. There's a high risk that the going will be tough for some time, but it's likely that – in due course – the "correction" will end and prices will stabilise and rise again.
So, when will those prices rise once more? Your buy-to-let property would need to stay in the market until at least 2013 for you to ride out the rough, says Rob Clifford at broker Mortgageforce: "Think carefully about your objectives – if you're hoping to achieve a certain capital growth during the next couple of years, you'd be better off putting your money into a savings account. Unless you find a bargain property and hold it for five years, avoid buying right now."
Mark Harris at Savills Private Finance suggests 10 years as a guide for a minimum investment term, and warns that loans are increasingly expensive. "Fewer buy-to-let mortgages are available as a result of the credit crunch, and they require bigger deposits – at least 15 per cent and more likely 20 or even 25 per cent, with surplus rent to the mortgage payments," he says. So for your £275,000 property, you'll need a deposit of up to £68,750.
Harris adds that not all lenders will let you rent out to a family member, further restricting choice. On a brighter note, rents look set to remain buoyant thanks to high demand from thwarted first-time buyers and immigration, although areas with over-supply of "off-plan" flats are suffering.
Send us your questions and you could receive £50 to spend at Amazon
Foxed by jargon? Worried by the credit crunch? Email a question to email@example.com. We will not reveal your identity, and we cannot give specific advice. If your question is printed, you'll receive a £50 voucher from Amazon.co.uk, so you can kit out your home with anything from a lawnmower to an espresso machine. www.amazon.co.uk/homeandgarden
Independent Partners: Get fee-free expert mortgage advice and find the right mortgage deal for you.
- 1 Al Pacino on suffering from depression: 'It can last and it's terrifying'
- 2 Half of young women unable to ‘locate vagina’ and 65% find it difficult to say the word
- 3 Saudis risk new Muslim division with proposal to move Mohamed’s tomb
- 4 A teacher speaks out: 'I'm effectively being forced out of a career that I wanted to love'
- 5 Mexican woman becomes world’s 'oldest person' at 127
Rotherham child sex abuse scandal: Labour Home Office to be probed over what Tony Blair's government knew - and when
What do immigrants really think of Britain? Polish immigrant's Reddit post goes viral
Ashya King: Parents of five-year-old boy refused permission to visit him in hospital and denied bail at Spanish court
With Douglas Carswell joining Ukip, my party has taken another giant step forward
When elitism grips the top of British society to this extent, there is only one answer: abolish private schools
Ukip Douglas Carswell defection: Tory MP jumps ship to join Nigel Farage
iJobs Money & Business
£600 - £900 per day: Harrington Starr: Infrastructure Lead, (Trading infrastru...
£35000 - £38000 per annum + benefits: Ashdown Group: A highly successful, glob...
£60000 - £75000 per annum + BONUS + BENEFITS: Harrington Starr: Business Anal...
£40000 - £50000 per annum + benefits+bonus+package: Harrington Starr: SQL Impl...
Day In a Page
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony