Institutional investment can capitalise on a drop in buyers

Institutional investment can capitalise on a drop in buyers

A drop in the number of buyers in London, coupled with improved business sentiment and hiring levels, could potentially leave a gap in the market to be exploited by institutional buy-to-let investment. 

According to new figures released this week by the Council of Mortgage Lenders (CML), the lending levels seen in Greater London fell in the first quarter of 2014.

The report stated that there were 20,800 home purchase loans approved in the first three months of this year, and although this was 22 per cent higher than the same quarter a year ago, it was 13 per cent lower than figures seen at the turn of the year. 

Loan value was also lower in the past three months than it was at the end of 2013, with overall mortgage lending for the period at £5.6 billion, a drop of 10.6 per cent compared to the quarter prior.

It's a reality only likely to be repeated in the months to come as well, with the Financial Services Authority's new mortgage regulations tightening rules and making it harder for people to get a loan than it has been in the past few years. 

The news comes at a time, however, when the economy is constantly improving, and businesses around the capital are expecting to increase their hiring over the rest of the year, which means sales should actually be higher. 

With a slowing in the number of buyers, coupled with the fact there is a shortage of new homes being built, could there be a gap in the market for institutional build-to-let properties?

The government has been pushing the notion quite heavily in recent times, and with an influx of new people coming to London needing somewhere to live at a time when mortgage lending is low, it represents a healthy time for larger organisations to kill two birds with one stone.

Not only will the building of new blocks specifically for rental purposes mean that the housing crisis is tackled, but companies should be able to make fantastic yields on their investment, with lower mortgage lending only likely to increase demand from newcomers to the city.