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Boom in commercial buy-to-let gives investors chance to gain significant returns2nd June 2013

David Wilson
In a climate where cautiousness has reigned supreme, a surprise avenue has appeared for investors looking for near-instant returns for their money. At a time when the housing market is providing little comfort for homeowners, aspiring first-time buyers and property developers, it seems that the buy-to-let market could provide the answer to their prayers.

The housing market is underperforming right now and given that interest rates are pretty low at the moment, letting properties out to tenants and businesses could be the best possible source of income for property owners. Letting, as many landlords will know, at least provides guaranteed income on a weekly, monthly or annual basis, while interest in buying properties outright isn’t there.

Letting enabled by lending

Banks and building societies that may have been reluctant to lend money to anyone for a buy-to-let mortgage have been able to help people with an interest in that particular product out. The government’s Funding for Lending scheme saw the banking sector receive £80bn in order to try and free up funds for businesses and homeowners.

Funding for Lending has meant that the number of buy-to-let mortgages and loans given the go-ahead have increased massively. At the same time, demand in the rental sector has skyrocketed, partly due to the fact that, despite the problems in the housing market, many people find that renting their own property is the best they can hope for due to sky-high house prices.


Temporary gains?

Having narrowly avoided a triple-dip recession, it’s not impossible that a recovery in the UK economy could take place. If so, there’s a chance that the growth in the buy-to-let market could be at best temporary. A spokesperson from Totally Money said:

“It’s no surprise that buy-to-let is booming. Low interest rates are here to stay for at least a couple more years, meaning mortgage payments will stay low while savers suffer – the average savings yield is an abysmal 1.09 per cent.

“With rental yields soaring upwards of 6 per cent in parts of the country, buy-to-let is starting to look like a smart investment. If you have the capital then the rewards are very attractive – there are few other investments that come with an expectation of inflation-busting income as well as capital appreciation." 

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