Is the BTL market suffering from the much publicised ‘credit crunch’…?

This month's consumer confidence figures from Lloyds TSB, showing the best interest rate expectations for over a year and the greatest optimism about employment prospects in over two years, may suggest that the gloomiest views about the economy are not so widely shared.

One issue upon which there is broad agreement is that the housing market has decelerated, the only disagreement being over whether this will be a soft landing as the market corrects itself or the slowdown will become a crash.

The Observer reported this weekend that Tim Warrington of housing website landlord.co.uk was reporting a pessimistic mood. "Too many landlords selling in the UK could send the property market into freefall," he warned. Jeremy Leaf of the Royal Institution of Chartered Surveyors told the paper that it was those landlords with the smallest portfolios - two or three properties - who would currently be "nervous", adding that this was because they "may not be able or willing to take a longer view [of the market]".

Overstated pessimism

Yet, once again the mood may not be so bad. Charcol reports that the Association of Residential Letting Agents (Arla) did report a small drop in the number of landlords looking to expand their portfolios from 57 per cent of them earlier this year to 54 per cent now, but this Charcol suggests, shows that there is still plenty of enthusiasm for investment in the market despite the slowdown.

Furthermore, the notion that a fire-sale of buy-to-let properties may take place and cause a housing crash is an unlikely one, according to Charcol's Ray Boulger, who told the Observer: "The problem would come if these professional landlords [those with ten or more properties, who make up over 90 per cent of the market] started selling their portfolios and I don't see any sign of that."

But perhaps the key issue is just how much the buy-to-let industry has to gain from the state of the housing market. Arla themselves made this point through spokesman Malcolm Harrison last week when he said that a slowdown would bring about a "thriving" rental market as more and more people sought to rent rather than buy.

There now appears to be clear evidence that this is happening. New figures from property agents Hamptons International show that the value of UK lettings has soared by 40 per cent between August and September this year, with many cases of landlords asking for more than 20 per cent higher rent in renewals.

Lettings market ‘robust’

Kate Whotton, the regional lettings director for the firm, said the research showed that the recent housing trends had "exacerbated" the situation in what was normally a busy month to start with. "The lettings market becomes more robust if the sales market suffers and this is certainly the case at the moment," she added.

Describing the current rental market as "incredibly strong at the moment", she said this was a time of year when people were moving to various cities, particularly as the start of the academic year approached or last year's graduates start new jobs.

"Landlords are taking advantage of these conditions and realising the investment opportunities available to them," she stated.

Thus far from being a doom-and-gloom situation, it appears there is a very good reason for the buy-to-let market to view the slowdown in the housing market with optimism. Of course, it may not last, but that doesn't necessarily mean a housing crash - if interest rates are cut the reverse may be true. But for now there is a major opportunity for investors to increase their rental returns.

http://www.assetz.co.uk