Rising house prices are encouraging more people to enter the buy-to-let market as landlords, with a transfer in interest away from London and the South-East and towards the Midlands and the North, UCB Home Loans says.
The report by Nationwide's specialist self-certification lender, which gives a detailed breakdown of current buy-to-let activity across the UK, refers to a number of areas in which buy-to-let activity is buoyant, including Wakefield, Leeds, Middlesbrough, Stockton, and parts of Newcastle, Birmingham and Manchester.
UCB Home Loans managing director Charles Reed says: “The rapid rate of house price rises has been driving the buy-to-let market, with many buyers more focused on capital appreciation rather than long-term rental income.
“We are now seeing interest in buy-to-let property spreading out from London and the South-East. Activity has cooled down in areas which saw large price increases a year or two ago, and the greatest growth in buy-to-let can now been seen in more northern areas, where house price growth has been catching up over recent months. ”
Figures produced by Nationwide Building Society show that the average house price in December was £117,206, having risen by 1.7% in the month. Prices were up by 25.3% in 2002, compared with 13.8% in 2001.
In areas such as London and the South-East, where prices have already risen to high levels, some first-time buyers are now opting to rent whilst they save for a deposit on their first purchase. However, the rise in the ratio of landlords to tenants resulting from the buy-to-let boom has contributed to a general fall in rental yields in parts of these regions.
Reed adds: “We expect the buy-to-let market to continue growing in 2003, but the rate of growth will probably slow down towards the end of the year. House prices are likely to grow by around 10% nationally this year, but with wide regional variations. ”