Buy-to-let grinds to a halt

THE buy-to-let market has come to a standstill as rising interest rates and flat property prices take their toll, figures showed today.

The number of new landlords looking to rent properties stagnated for the first time since 1998 as current conditions deterred new investors from entering the market, the Royal Institution of Chartered Surveyors (RICS) said.

But it added that existing landlords were holding firm with a declining number putting properties up for sale after tenancy agreements expired. At the same time demand from tenants also increased, as prospective buyers wait for the property market to stabilise before buying their own place.

Overall, 21% more surveyors reported seeing a rise in the number of people looking to rent a home during the three months to the end of April than those who said they had seen a fall.

Rents are continuing to rise in all regions of Britain except the South East, with the Midlands and Eastern regions seeing the biggest gains. Looking ahead, 14% more surveyors expect this trend to continue, than those who think rents will fall, although this is down from 19% last year.

During April the average rent was £743 a month, with a one bedroom flat costing about £554 a month, while a four-bedroom detached home rented for an average of £1,195.

Unsurprisingly, the highest rents were in London and the South East at an average of £1,671 and £747 respectively, while the cheapest rents were in Wales at £348 and Scotland at £386.

Investors' rental returns on buy-to-let properties rose for the first time since 2000 during the three months as a result of rents rising but house prices remaining stable.

RICS spokesperson Jeremy Leaf said: 'Poor prospects on return and capital growth are keeping new investors out of the buy-to-let market although continuing healthy tenant demand means existing landlords are holding firm.'

He added that investors may also be staying away from the market until new pension rules come into force in April next year. These will enable people to include residential property in personal pension funds for the first time.

But the group warned people to be wary of get-rich-quick schemes which seek to capitalise on inexperienced investors' perceptions that property is an easy way to make money.