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Last Updated: Wednesday, 20 June 2007, 15:35 GMT 16:35 UK
How buy-to-let is changing your street
By John Andrew
BBC News

It was not so long ago when you could walk down any UK street and be hard-pushed to find a single "to let" sign.

To Let signs
To Let signs are much more common than a decade ago

These days, there are forests of them in some areas - well outnumbering homes for sale.

Behind the signs are a new breed of landlord, people who have lost faith in pensions and other investments to deliver, and are putting their faith in property.

People like Patrick Macvean, who has just bought his third property - a small Victorian terraced house in Chatham, Kent.

Decent income

We hope to get a decent income, I suppose 5,000 to 10,000 a month, something like that
Patrick Macvean

Mr Macvean's latest purchase is for a speedy renovation and sale, but his other two are rented out and he and his wife plan to increase their buy-to-let portfolio.

"We're going to increase the buy-to-let as and when we can afford it," said Patrick.

"We hope to get a decent income, I suppose 5,000 to 10,000 a month, something like that."

He says he is being cautious, but doubts whether some new investors are quite so savvy.

"There are an awful lot of people doing it but many will lose out because they've overstretched themselves," he explained.

"Some people tell me to take more risk and accumulate lots of properties, but if interest rates suddenly skyrocket I don't want to end up with any properties being repossessed," he warned.

Changing market

A recent survey for the Greater London Authority found that two thirds of new-build properties in the capital were being snapped up by buy-to-let and other investors.

Buy-to-let book
There are more than 20 guides to buy-to-let for sale on Amazon

Tim Craine, who co-wrote the report, believes even that may be an underestimate.

He says investment demand has changed the nature of the new-build market across Britain.

"As prices have risen, and as owner-occupiers have been priced out of the market the investors have stepped in and taken up the demand-slack at the price that new-build homes go for," he said.

"We've seen a complete shift in the industry's focus from selling to owner occupiers to selling to investors."

But what is good for investors has not been so good for first-time buyers like Liz Overend.

Her latest trip to the estate agents has been as fruitless as all the others.

She has given up looking in the hope prices will eventually calm down and blames investors and speculators for pricing her out.

"Basically I was outbid by a property investor who put the property back on the market about three months later for 30% more than the original asking price," she said.

"So at that point I thought I can't compete with the investors so I'm better off just not trying and have stuck with renting."

Tenant demand

One commentator recently described buy-to-let landlords as "locusts that consume everything in their path".

The buy-to-let industry does not dispute that it competes with first-time buyers or that it plays some part in pushing up prices.

But John Heron, director of mortgages at the buy-to-let lenders Paragon, said the sector should not be blamed for high prices.

"What's essentially given rise to that is the fact we build far too few of the right type of properties in the UK year by year," he explained.

"The desire of buy-to-let landlords to purchase property is essentially tenant-driven rather than asset-driven."

Surplus flats

In the cities of Leeds and Liverpool eyebrows have been raised about what some describe as "buy-to-leave".

Liverpool waterfront
Some new flats in Liverpool are buy-to-leave, not buy-to-let

Thousands of new flats are being built and sold, but in both cities there are concerns that significant numbers have been left empty.

In Liverpool, estate agent Steve Beilin told the story behind one block near Liverpool's waterfront.

"The flats were sold mostly in 2004 when prices were booming," he said.

"People bought off-plan and since then the market has fallen somewhat so that means people are having to buy properties, which are now worth less than they paid for.

"They've been forced by their lawyers to complete and are now holding the flats empty so they can sell them in pristine condition when the market improves," he explained."

A place to live As well as changes to the property market, there is pressure to restrict the growth of investment buying by looking at some of the tax advantages that buy-to-let landlords currently enjoy.

I can't compete with the investors so I'm better off just not trying and have stuck with renting
Liz Overend

These include the ability to offset their mortgage interest payments against rental income.

Liz Overend, who now helps run a website for frustrated first time buyers (PricedOut.org) says the government should act.

"Houses should not be about investment, they should be about a place to live," she said.

"There are hundreds of thousands of people that just want a place to live where they're not subsidising their landlord's future but their own.

"We should encourage people to invest in other forms of investment and restore faith in the pensions system. That will go a long way to helping our predicament," she added.

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