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06 Thursday Dec 2012

For or against: Buy to let's growth divides the masses Posted by:

While much of the property market is in the doldrums, buy-to-let is thriving. The clearest evidence of this comes with the number of mortgages now available to landlords: with 100 more buy-to-let products on offer than this time last year, lenders know demand when they see it.

This heightened competition means that the average rate on a buy-to-let mortgage has also fallen, says Moneyfacts. There is also more choice at higher loan-to-values with a number of deals available to those with just a 20 per cent deposit. This makes the market even more accessible for investors and is set to fuel growth further still.

Tales of rising rents and increased demand as tenants continue to struggle to buy their own home, abound. While the equity markets may have disappointed over the past decade, property continues to provide decent yields, if not capital growth.

Yet it’s not all positive. ‘Why I’ve quit buy-to-let’ (http://www.guardian.co.uk/money/2012/feb/03/why-quite-buy-to-let) is a fascinating article which was published on the Guardian website this week. It was made all the more interesting for the comments that followed _ just shy of 450 at the time of writing this. As such, it seems to have generated a lot more ‘heat’ than anything else on the site.

Although the landlord featured in the article sold up his buy-to-let property because he said he felt bad about profiting when investors like him are pricing out a generation of would-be homeowners, he came in for much criticism. While a small handful of readers praised him for ‘seeing the light’, the majority were outraged that selling up meant he generated enough money to pay off most of the mortgage on his own home. Presumably, giving the money to a homeless charity was the only thing that could have redeemed him _ and even then you wonder whether that would have been enough for some.

Many readers felt it was all too little too late to be feeling bad when the damage had already been done and tenants had been exploited (although he says he didn’t do this) and first-time buyers were kept off the housing ladder (which he admits may have happened).

Whatever the rights or wrongs of this particular chap’s actions, it is a fascinating insight into attitudes towards homeownership in this country. On the one hand we have many people, particularly in their 50s and older, who have made considerable money out of their property. Then you have the youngsters (in their thirties and below) who have little hope of getting on the housing ladder for years to come. And then you have the swathes of buy-to-let landlords who are looking for an alternative to a pension or to raise money to help their own kids onto the housing ladder.

There are good landlords and there are bad ones. Whatever the rights or wrongs, as the sector continues to pick up and it gets easier to obtain investment funding, there are going to be quite a few more of them in the months and years to come.