In fewer than five years, it has gone from hero to zero and back to hero again. But whoever says the buy-to-let market is heading for zero-dom once more - and there are voices saying just that - isn’t looking at the same economic landscape I am.
In the medium term at least, the key driver of buy-to-let will be the eurozone. Its deteriorating state is making UK lenders nervous and causing wholesale rates to rise.
And what a state the eurozone is in. The economies of Spain, Greece and Italy are looking rather like Francis Bacon’s infamous triptych, Base of a Crucifixion (below) – contorted, shattered and screaming.
In mid-April, for example, stock markets went into the red while Spanish yields once again topped 6% – not far off the 7% level that is generally seen as triggering a default. And why wouldn’t they, given the state of the Spanish economy and its dire job situation?
The panic in mid-April was also a reflection of how markets are increasingly sceptical about the European Central Bank’s long term refinancing operation, which has only kicked the can down the road.
Cheap money is not a substitute for money – in the eurozone anyway. It simply puts off the inevitable.
“The economies of Spain, Greece and Italy are looking rather ike Francis Bacon’s infamous triptych
Meanwhile, it’s Greek vote time again in May and it is increasingly clear that the pro-austerity parties may not have the numbers to form a government, which has triggered a renewed fear of default.
And then there’s Italy, which is facing huge economic challenges, job market reforms and a massive debt overhang of its own.
To top it all off, the flames of the eurozone fire were fanned mid-April by weaker than expected jobs data. March’s non-farm payrolls came in at 120,000 – short of the 200,000-plus jobs observers had expected the US economy to put on last month.
The markets know that a weak US only serves to exaggerate the woes in the eurozone.
Because of all this, it’s no surprise that the high street banks are disinclined to lend and have stringent criteria.
After all, if the eurozone goes down, our own stuttering economy will go with it.
Sorry to be histrionic, but it’s that bad. And the banks know it, which is why their lending criteria will remain stringent for some years yet, keeping people off the property ladder and sending them to landlords’ doors.
My verdict is that the buy-to-let sector, buffeted by the storm winds across the channel, will prove robust for at least the medium term.