Flat Rental Demand Falls - BMV Troubles

Flat rental has fallen dramatically according to a survey carried out by The Royal Institution of Chartered Surveyors (Rics).
Demand for flats have been falling over the last 3 months to 17% - down from 37% in the previous quarter which could have an impact on investors holding large flat portfolios.
The Rics stated the report highlights the sluggish market in the new build flat sector, this sector has been under increased scrutiny of the past 6 months as many first time investors with large LTV buy to let mortgages are finding it increasingly difficult to make the rental stack up.

Many investors were purchasing property BMV, below market value, and in effect not requiring a deposit - A high risk strategy as often the rental barley covers the monthly mortgage payments.
Many new build flat investors are also finding it extremely difficult to sell the property at the price they originally paid due to the new appeal value and resale value differing.

The other problem with the resale of the properties is they also fall short when stacking up the buy to let mortgage for rental calculations, many buy to let mortgage lenders now require 125% rental calculation on the mortgage payments which makes it difficult to achieve, especially now with the fall in demand.

125% Rental Calculation Example
Mortgage amount: £100,000
Monthly payments: £500 (at 6% interest)
Rental required: £625 (£500 x 1.25)

In the current market it is extremely difficult to find new build flats under £150,000 in the current market with an even more difficult challenge to find properties that would rent for over £700 per month. Another factor effecting the buy to let mortgage market is that many lenders, having seen the problems with rental and resale of new build flats, will not lend money if the property is under a certain number of years old.

There are still good buys to be had where rental stacks up will with easy resale, be cautious of the hundreds of websites offering large discounts of new build properties whist also offering 100% mortgages, most will require a membership fee, finders fee and deposit. In my own experience I have found it near impossible to find a buy to let mortgage of these offers.
Be warned.

For more information on Buy to Let mortgages and ways to put little if any money down then you can visit my website or contact me for more info.