Investment in buy-to-let market slumps 18%
The buy-to-let market appears to have run out of steam after its phenomenal boom, according to figures yesterday showing that lending in the sector has fallen for the first time since the speculative boom started in the late 1990s.
Investment in buy-to-let properties slumped by 18 per cent in the second half of the year.
The figures came as two separate reports pointed to a marked cooling in the wider housing market.
The Royal Institution of Chartered Surveyors said house prices fell for the sixth month in a row in January but at the slowest pace since September. And the Government's new index, set up to provide clarity on the state of the market, said the price of the average home fell in December. Prices dropped 0.7 per cent, the largest since February last year, taking the annual rate to an eight-month low of 10.7 per cent, the Office of the Deputy Prime Minister said.
The Council of Mortgage Lenders said the number of mortgages taken out by buy-to-let landlords fell by 22,100 to 97,800 between the first and second halves of 2004. It was the first drop in borrowing since the CML started tracking the market in 1999.
The proportion of borrowers at least three months behind on their mortgage hit its highest level since 1998 and has risen at a faster pace than mortgages in general. But the CML said there was no evidence that investors were rushing for the exit and said the sector would continue to grow.
Buy-to-let lending - one of the key phenomena of the recent boom - continues to account for about 6 per cent of total outstanding residential mortgage lending.
Andrew Heywood, a senior policy adviser at the CML, said: "As the housing market boom gradually subsides, it is no surprise that growth in buy-to-let lending is slowing down. Our survey suggests that buy-to-let investors are largely holding on to their existing portfolios, but simply making fewer acquisitions."
He said research by the CML suggested most expected to maintain or increase their holdings, and had a long-term interest in the market.
"This trend of slower, but continuing, market growth is what we expect to see throughout 2005 [and] we are confident the buy-to-let sector will continue to grow and to form an attractive part of many investors' portfolios."
Lee Grandin, the managing director of the brokers Landlord Mortgages, said there was no sign of distress among professional landlords. "The reduction is being fuelled by the would-be landlords and landlords with one or two properties," he said.
Sabina Kalyan, a property economist at the analysts Capital Economics, said the slowdown should ease price pressures at the lower end of the property market.
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