Buy to let risk to property market?

The current uk property market has been buoyed by buy to let investors. Many have become signifcantly rich as the prices of property have risen ever upward. The property slump of the late 80s and early 90s have become a distant bad dream

But are buy to let investors more risky to the house market than first time buyers?

A number of investors are not buy to let. They are leaving the properties empty and just looking for capital gains. In some towns 25% of new build properties are vacant.

[Why are they doing this? rental yields are so low. In my town the gross rental yield for flats (rent /property price) is less than 5%. When you knock off costs such as voids, repairs and management fees the yield will be sub 4%. The view is why risk hitting your capital values with tenants who cause damage etc. and if its empty its easy to sell.]

This is not investing for a return it is betting in capital growth. (I argue if there is not an income it is a bet not an investment, I give you not an original concept.)

So if the market slows down the owners of these empty properties have costs (rates, service charges, etc.) and are seeing low, no or negative capital growth are going to be tempted to sell.

Unlike other investments such as shares, gilts or bonds properties are unique. You do not ring your broker up for 5 buy to let flats. Similarly if you sell you have to find a specific buyer for the flats (which is where I believe the problem is most acute.) If the market turns down who is going to buy these flats.

Not other investors yields are too low and without a rise in rents are not going to increase.

First time buyers are priced out of these properties and why would they want them. You can buy a house for roughly the same price as the flats. Maybe not as trendy. But unless you are earning huge amounts you need to be a couple to afford them. By the time people can look round to buying in couples you can add the thought of children (if not now in a couple of years.) Who wants kids in a flat especially taking prams etc up lifts.

The amount of buy to lets in flats is huge. The main area around me for flats is over 80% buy to lets (or buy to bets.)

If the market changes these people could look to get out quick. They are not living in them. They do not need them, unlike first time buyers. This means a down turn could turn ugly much quicker in the buy to bet arenathan the rest.

Remember flats suffered disproportionately in the last down turn. They will again