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Buy-To-Let to double by 2010

Buy to Let Bournemouth to Boom. The number of Brits owning one or more second homes to rent out is set to double within just three years, according to a new report.

While many young people are struggling just to get on the first rung of the property ladder, new research reveals that two million UK homeowners (seven per cent) already own a second home in the UK or abroad.

The major study by market analysts Mintel found that currently one million people – three per cent of homeowners – are buy-to-let landlords, owning property in the UK that they let out, while the rest simply enjoy the luxury of having more than one place they can call home.

And the research predicts that within the next three years, a further one million homeowners want to have another property in the UK that they can let out, doubling the total UK buy-to-let market by 2010.

Mintel’s senior financial analyst Paul Davies said: “It is clear that these days, buy-to-let is no longer the exclusive domain of professional portfolio landlords.

“Increasingly, property owners are seeing the benefits of investing in bricks and mortar and often regard the second homes market as a good alternative means of saving for retirement.

“As long as these trends continue, future growth in this market should be guaranteed.”

He said that although not all second property owners will opt for a buy-to-let mortgage, in 2007, the number of new buy-to-let mortgages is expected to reach 361,000, up almost 10 per cent on last year’s figures.

Similarly, over the past year, gross advances on buy-to-let mortgages – the total amount borrowed – will have also increased by around the same amount (nine per cent), to reach just under £42 billion this year.

By 2011, Mintel predicts new sales of buy-to-let mortgages will be more than 550,000 a year, up 53 per cent on 2007 figures, while gross advances will grow at an even faster rate (65 per cent) over the same four year period, reaching nearly £69 billion.

Mr Davies added: “The buy-to-let mortgage market has experienced meteoric growth since the late 1990s, outperforming the wider mortgage market over the past few years.

“We expect the market to continue to grow at a healthy rate over the coming years, driven by the expected expansion in the population and the continuing strong demand for rented accommodation.”

The research reveals that people’s faith in property is generally greater than in pensions. More than a third (36 per cent) of homeowners believe it is actually ‘better’ to invest in property than a pension, rising to more than two-thirds (68 per cent) of second property owners.

Additionally, only a very small proportion of homeowners are put off making further property buys because of the risk of further interest rate rises (10 per cent) or a potential housing market crash (eight per cent).

However, on the flip side, one-in-five homeowners (20 per cent) appreciate that there are risks involved and 15 per cent believe that there is an ‘element of luck’ when it comes to investing in property.

Today, well over half of homeowners who plan to buy a second property within the next three years, would need to take out a second mortgage (57 per cent), while one-in-four (26 per cent) would release equity from their own home, to help fund the purchase.

Other potential sources of finance include, drawing on their own savings (38 per cent), using the business (10 per cent), inheritance (seven per cent), downsizing (six per cent) and a pension lump sum (six per cent).

Meanwhile, some 14 per cent – or one-in-seven – also say they plan to share the funding with someone else.

Mr Davies said: “Just as in the mainstream mortgage market, where there is a growing tendency for close friends and family to group together to buy a first home, it also seems that this is being mirrored in the buy-to-let market.”

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Posted: 27th April 2007

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