Buy-to-let Restricted to Wealthy

December 20th, 2007

The buy-to-let market in the UK is showing signs of becoming inaccessible to the average potential investor. The needs of student populations, immigrant communities, and young would-be first time buyers being priced out of the market will always drive the need for a ready supply of buy-to-let properties; however, questions are being raised about the affordability of investment ventures by the average prospective investor, who has traditionally used buy-to-let properties to supplement income or act as a retirement nest-egg.

According to a RICS (Royal Institute of Chartered Surveyors) report issued earlier in the month, buy-to-let investments are becoming increasingly restricted to wealthy investors, with the average deposit required on buy-to-let mortgages now as high as 30%, or £65 600. This is over six times as much as was required a few years ago – in 2002, the average deposit on a buy-to-let mortgage equalled only 8% of the property value. This increase means that the average investor is being literally priced out of the buy-to-let market, with only wealthy investors with a valuable portfolio to release equity from able to raise a suitable deposit.

For the average investor, it may be worth investigating other avenues for investing your hard-earned money during 2008. In fact, some experts are advising that simply having your money in a high-interest savings account is a better option than the buy-to-let market at this point. With the credit crunch squeeze being felt more keenly, particularly in the housing market, it might be best to sit tight to see which way the market swings before leaping.