British buy-to-let market to shrink by 2/3- report
August 18th, 2008 | by admin |LONDON, Aug 18 (Reuters) - The amount of privately rentedaccommodation in Britain is likely to shrink by about two-thirdsin the next few years as more investors pile out of thebuy-to-let market, savings group Skandia said on Monday.
Skandia said up to 18 billion pounds ($33.70 billion) ofequity was likely to be released from UK housing as the stock ofbuy-to-let mortgages collapsed to 44 billion pounds from 120billion pounds at the end of 2007.
Skandia, a unit of insurance group Old Mutual (OML.L: Quote, Profile, Research, Stock Buzz), said the market was likely to contract sharply after a period ofextraordinary growth and would revert to historical levels,without specifying the time frame.
The company cited data from the Council of Mortgage Lendersto show the stock of UK buy-to-let mortgages was just 2 billionpounds in 1998, since when the market has grown to aboutone in 10 of all UK mortgage loans from less than one in 100.
Skandia said falling house prices — the market is about 10percent down from last year’s peak levels — plus higher debtcosts in the wake of the global credit crunch and sluggishrental growth would lead to more landlord house sales.
“Higher mortgage rates and falling property prices willcause investors to reconsider their exposure to residentialproperty and many will choose a more diversified approach,” NickPoyntz-Wright, chief executive of Skandia UK, said.
Skandia did not address whether a rush of buy-to-letinvestors for the exit doors might exacerbate falls in thehousing market and bite deeper into the equity built up byinvestors after a decade-long bull market.
Britain’s biggest buy-to-let lender Bradford & Bingley(BB.L: Quote, Profile, Research, Stock Buzz) said on Monday that investors had taken up only 27.8percent of its 400 million pound rights issue, illustrating itsstruggle to raise funds in the face of a fast-deteriorating UKeconomy. Double click [ID:nLI682369] to read the full story.
(Reporting by William Kemble-Diaz; editing by Karen Foster)
(See www.reutersrealestate.com for the global service forreal estate professionals from Reuters).
