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Property Investment ‘Set for a Return’

A property expert believes there are hopes the buy-to-let market will begin a mini revival in the market, particularly for first time sellers looking to move upmarket and the snowball impact thereafter.

Matthew Gray, property director at leading legal, financial and property specialists Pagan Osborne, has said the increase in buy-to-let mortgages, reasonable property prices and an ever-increasing demand for rental accommodation are driving the market back onto a stronger footing.

It has been revealed that buying a home is 6% cheaper than renting, with the Bank of Scotland saying buying costs fell by 6% in 2011 with rental costs increasing by 1%.

The Co-operative Bank reported buy-to-let mortgage lending has soared by ten times in 2011 to around £650m a year. It has been reported banks are now more open to buy-to-let mortgages, relaxing the criteria and keen to bring these investors back into the market.

Matthew said:

“This flicker of life in the property investment market is very welcome in deed. Often this is the last group out and first group back in when there is a dip so we would hope their return would signal the beginning of a wider upturn.”

The latest Citylets rental report showed the number of lets increased by 17.5% year-on-year and the Scottish average rental income reached a high of £670 and half of properties were let within four weeks, with smaller flats being let quicker than larger properties. In Edinburgh, the rental yield increased by 4.1% to £783.

Andrew Milne, a partner at surveyors DM Hall, said:

“Demand for rental accommodation continues to increase and is not confined to any specific sector of the housing market. Demand is outstripping supply therefore rents continue to rise.

“For some investors, money in the bank is not producing a high enough return and the alternatives are too risky with the stock market proving volatile. Property is seen to  be relatively safe, particularly if purchased at the right time in the right area and after taking proper advice.

“Lenders are being drawn back into the buy-to-let market so funds should be available to the right applicant. Most are imposing some sort of lending restriction and there will also be strict criteria to meet but where the investment is well thought out and well planned, opportunities certainly exist.”

Matthew added:

“The demand for rental income is at its peak for a generation meaning a premium yield can be achieved – this might be good news for the landlords but not particularly for the tenants.

“Increasing competition in the market mean more investors get a bite of the pie and tenants are less likely to be hit by soaring rentals. It’s the old supply versus demand scenario.

“Property is an attractive investment, as the saying goes there is nothing as safe as houses. And, despite the significant downturn there has been since the boom years, those looking upon property as a long-term investment can still, and will have, make a strong return.

“The nature of property market has changed, it must now be viewed as a long-term investment rather than a quick turnaround but investors are responding and succeeding in this changed marketplace.”

Property-focussed investment funds have been reporting strong yields and positive returns, while the private investor, hit by reduced pension pots and attracted by low-interest rates, are being drawn back towards the buy-to-let market.

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