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Political spotlight on empty B2L properties

The phrase ’empty homes’ used to describe abandoned properties in rundown areas which were uninhabitable and certainly not fit to rent out.

But recent research shows that there is an increasing trend for buy-to-let investors to leave their spanking new properties standing empty. After all, tenants equal hassle and a property which is no longer in pristine condition.

According to the Department for Communities and Local Government, there are about 680,000 homes standing empty in England and the vast majority of these (over half a million) are privately owned.

The survey by a housing magazine states that a significant proportion of apartments being built in major cities are being snapped up by property speculators.

It suggests that 50% of new flats were left empty in Leeds, 40% in Salford and up to 30% in Hull. The report adds that “in some blocks the number of empty homes matched the number that are actually lived in”.

The increase in the popularity of buy-to-let as a form of investment is well documented, as is the concern about the long-term sustainability of many new developments.

If there is a significant increase in the number of ‘For sale’ notices including the phrase ‘never lived in’ these sort of investment purchases could come under greater political scrutiny and buy-to-let investors may be forced to rent out their properties.

The DCLG points out that “empty homes not only restrict housing supply, they also detract from the quality of the local environment and can cause significant problems for local residents”.

The Royal Institution of Chartered Surveyors estimates that properties adjoining poorly maintained empty homes can be devalued by as much as 18%.

The government has recently introduced Empty Dwelling Management Orders and the Liberal Democrats also have a policy relating to the enforced renting out of empty properties.

Demand for private rented properties is expected to continue to rise. Recent government figures show that in 2006 70% (15.4 million) of all dwellings were owner-occupied, with a further 2.5 million rented privately. This represents a 22% rise in private rentals since 2001.

Last week saw the accession of Bulgaria and Romania to the European Union. While there are tight restrictions on work permits, these latest European members will form part of the 185,000 immigrants expected annually over the next three years and this will impact the buy-to-let market.

A spokesman for Paragon Mortgages says: “Inward migration is a key driver of tenant demand. We know that less than 20% of migrants become home owners within five years, which means that a net influx of people, particularly from Central and Eastern Europe, will have a direct impact on the private rented sector.”

In December, Moneyfacts.co.uk announced that the number of buy-to-let products had broken through the 2,000 mark for the first time – an increase of around 50% in the number of these products since the beginning of 2006.

The Council of Mortgage Lenders is predicting that borrowing by buy-to-let investors will rise more quickly than borrowing by home owners, with such lending accounting for 13% of gross lending in 2007 and 14% in 2008 – up from 11% in 2006.

With continued demand from both renters and investors, new products and better buy-to-let rates are likely to be seen in 2007. But if this results in properties standing empty while the housing shortage continues, it could provoke a political brouhaha.

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