The expanding buy-to-let loan market and a sharp rise in rental rates have tempted property investors back to the new-build market in London.
The downward trend in sales of new-build developments to investors has been reversed in the last week in the capital, according to Barratt Developments. The market had been struggling since 2007.
Sales of new-build homes increased by 179 per cent between January and September in comparison to last year, with investors attracted to the potential for higher returns while interest rates remain low.
Barratt London regional sales director Gary Patrick said Pontoon Docks in Docklands, Dalston, Lewisham, Deptford and Putney Square were among the most popular sites with investors.
Patrick said: “Rental returns and the potential for capital gain in the London property market have been convincing motivators for both domestic and international investors to add new-build homes to their portfolios.”
Chesterton Humberts area director Tony Gambrill backs up Patrick’s belief that the Docklands is becoming increasingly popular with investors.
Gambrill said: “Docklands is one of the hottest areas for buy-to-lets. The yields have increased due to the strong increase in rents and the lenders have become a little less stringent in lending criteria – which has made for a healthier environment for the buy-to-let investor. While international investors remain the bedrock for central London sales, UK investors are the mainstay in the Docklands.”
New-build buy-to-let properties near to London’s top universities have been especially popular with international students, according to Chesterton Humberts, helping the capital’s property market outperform other areas in the last 10 years.
The revival in buy-to-let has been driven by the rising demand for rental properties, according to analysts. The average UK rental income hit £713 per month in August, after increasing for seven consecutive months.
The number of buy-to-let mortgages issued in the second quarter of this year was up by 25 per cent on the first three months of 2011, according to research by the National Landlords Association (NLA). Loan sizes have gone up by 6.4 per cent since January to reach £138,525, the group found.
NLA Mortgages managing director Paul Rockett said: “Wider choice and better products for landlords mean that the overall buy-to-let market is improving. Although demand for finance still outstrips supply, buy-to-let lending is gradually increasing – giving property investors a reason to be optimistic.”