Buy To Let Market Outlook

Statistics for the first quarter state UK growth was 2.9%. The service sector covers 70% of domestic product and has an annual growth of approximately 3.5%. The UK economic growth is expected to slow over the winter of 2007/2008 to around 2.5%

Over the next 1-2 years the growth rate will probably settle at the average rate of 2.75%p.a. but inflation is not looking so good.

Retail sales are growing at a rate of over 4% p.a. Major price rises include food, metal and crude oil. World economic growth is expected to remain at 5% until the end of the decade.

The consumer price index (CPI) has dropped to 2.5%p.a. because of the cuts in utility prices. Crude oil has risen to $70 per barrel and this will be reflected in the winter CPI data. Labour costs have fallen and have stayed at 3.6% for the past several months. Those including bonuses are coming in at 4.1%.

The Bank rate increases have shown in the decline of mortgage business. In April there was a fall in mortgage advances to £8.9bn. Businesses have been kept going by re-financing and buy to let investors.

The buy to let market is increasing due to the added number of students needing accommodation, the fact that first time buyers have been priced out of the market and also the increase in immigrant numbers.

The second half of 2007 will see a fall in gross advances with the current base rate being 5.75%.

Last month showed a significant drop in the House Price Index to 0.3%. Average house prices are now around £197,000. The new National Housing and Planning Advice Unit think the price/earnings ratio will rise even higher than the present rate of 5.8.

It does seem that house price inflation has peaked in respect of bank base rate rises and house prices are expected to rise at a rate of 5% during 2008-09.