Buy to Let is Dead. Long Live Buy to Let!

Well of course it’s quite a stretch to declare BTL dead and buried, but there is no doubt that the Credit Crunch dealt a blow that put the patient in intensive care. With the departure of much of the finance which sustained the small Landlord revolution, the government has been giving an indication of how it sees the future in its deeds if not its words. The government would like to see the shortage of residential accommodation satisfied by big business and big finance – the teen years of the 21st century are to see the birth of BBTL (Big Buy To Let – I just made that up so don’t bother Googling) and the Homes and Communities Agency (HCA) has confirmed that it is in advanced talks with  Aviva Investors, Aegon, Legal & General, and the Wellcome Trust about a total of £1bn of fund launches to finance a private-rented residential property sector managed by big business.

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In a further confirmation of the march of Big Business into Residential Housing the CR Property fund is launched today (Thursday). The Fund will provide British Land, the UK’s second-largest property company, with £300M to buy and rent out prime London residential real estate, and it will begin fundraising among wealthy investors, particularly overseas buyers interested in UK property. British Land will also take a small stake, in one of its first residential investments since selling most of its portfolio in 2006.

This cannot be seen as exactly the sort of project that the government is so keen to encourage,  because the government has been eyeing the dearth of opportunities for those previously finding homes in Social Housing, or as first time buyers. In contrast to this perceived need the British Land scheme will be limited to London, and will be invested in homes worth £500,000 to £800,000, with a small allocation for properties valued at up to £5m.

Nevertheless British Land see that they are replacing the small landlord saying “This steps into a gap caused by the disappearance of buy-to-let investors. This is a move to a more US-style service for tenants – giving a five-star landlord service to three or four-star properties” adding that the fund could buy up to 500 properties, which would be let to provide a target rental income yield of 3.5 per cent, but most of the returns, targeted at 14.5 per cent a year, are expected to come from capital growth of the properties.

Whilst British Land’s view is that the market was unlikely to show much growth this year, but forecast a recovery in subsequent years, there can be little doubt that this move hopes to take advantage of the investment maxim “Buy Low, Sell High”, which they espoused so astutely by leaving the Residential Market in 2006. The declared yield figures above betray a fascinating view of the residential property market in the coming decade – to be analysed in a further blog.

Meanwhile – welcome Big Business to the world of Landlording. Lets hope that you can fulfil the governments expectations of you as rulers of London Flats for Rent.

Read more:

http://www.propertyweek.com/story.asp?sectioncode=36&storycode=3155851&c=1#ixzz0cZQ9YuZ5

http://www.ft.com/cms/s/0/71a8075a-ffd6-11de-ad8c-00144feabdc0.html