Property Investment A Rich Man's Game

Almost a quarter of landlords expect to expand their property portfolios over the next 5 years, according to research from the National Landlords Association. But new property investors and landlords may have a tougher time according to RICS ( Royal Institute of Chartered Surveyors) which says that higher property prices and tighter credit conditions are limiting investment in rental property to the already wealthy.

According to RICS, the barriers to entering the buy to let market, driven by interest rates, tighter lending criteria, and mortgage repayments higher than rental have made property investment an unattractive proposition for many people. Property investors now need to put down a deposit of 30% of a property’s value compared to just 8% of the average property value in 2002 to get a foothold on the property investment ladder.

In the future, higher rents and an expected cut in interest rates should help to improve the situation for aspiring landlords, but David Stubbs, RICS senior economist said: “Would-be investors who have missed out on the impressive returns of previous years are now finding the hurdles to property investment are higher than they imagined. However, existing landlords should be able to use the equity in their past investment properties to fund the deposit needed for new ones, and this should ensure that demand from the buy-to-let sector does not dry up entirely.”

This view was echoed by the NLA, which reported that a significant proportion of existing landlords were planning to increase their property portfolios, but added that new property investors should be cautious and do their homework carefully.  Chairman of the NLA, David Salusbury said: “Residential property investment is not a means of getting rich quick. Those who are buying a property to let as someone’s home need to have a medium or long-term perspective. 

Demand for the right property in the right location remains sound, but there is an over supply of new build flats in some areas, which may make them difficult to let or sell.”