Bargains emerge for flush buy-to-let investors

Mature buy-to-let investors armed with hefty financial reserves are cashing in on property agents, house builders and developers left in the lurch by fleeing buyers.

They are eyeing clusters or units of properties, typically new build-flats, at almost half the peak market price, offered by sellers whose residential clients have walked away.

Desperate to shift their stock, these agents, house builders and developers will reportedly offer up to 45 per cent off to investors showing enough financial muscle.

As the investors are buying bulk cheaply, they can expect "significant capital upside once growth returns," residential investment agents at Knight Frank said yesterday.

Speaking to the Financial Times, the agents said yields in central London, particularly in areas with a high density of repossessed properties, are between 5 and 8 per cent.

Although the big discounts will get harder to find as stock levels fall, they cited yields of up to 10.5 per cent on sensibly priced properties in the capital's peripheral areas.

But the bargains were tipped not to last longer than the next six months, alongside a consensus that rents, even for so far resilient one-bed flats, would dip over the next year.

"Any contractor looking to cash in on the distress that builders are currently facing would need to bear in mind that they require a 25% mortgage deposit," advised Tony Harris of independent financial advisers ContractorMoney.

"But unlike in recent years, rental calculations are now far easier to justify to the lender thanks to the fact that we have buy-to-let mortgage interest rates under 5%."

He noted that while arrangement fees are high on the best schemes, "these costs can be added to the mortgage in most cases, and in terms of a cost of doing business, they could be easily justifiable if the discounts achieved are substantial."

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