Why buy-to-let is a long-term business

Buy-to-let has come in for some stick recently, with many gloomy predictions that the industry faces downfall because of the slowdown in the general UK property market . Despite the fact that rents are going up because more would-be buyers are opting to put off attempts to get on the housing ladder, a point demonstrated by the frequent 20 per cent plus rise in rents in mortgage renewals revealed by research from Hamptons International this week, many have still talked of a possible crash.

But this is not likely at all, least of all for large, professional investors, Ray Boulger of mortgage advisors John Charcol has stated.

He said: "From the point of view of buy-to-let investors, I would not recommend anyone enter that market with a short-term view." The problem, Mr Boulger explained, is that some smaller investors have done just that in the mistaken belief that a pot of gold awaited at the foot of every rainbow.

"Professional investors are aware that property prices don't just go up forever, but some of the amateurs have been sucked in on the basis that we've had 12 years of property prices rising and they perhaps haven't factored in that that's not going to happen forever," he said, adding that "as long as you expect the return to be good over the long-term, then you accept that".

On this basis, one may conclude that those cases reported in the press of buy-to-let investors who have seen their property market ventures end in tears have fallen into the former category. Those taking a longer-term view, however, with finances geared up to rise out occasional storms, can enjoy the benefits in the long-run.

Mr Boulger stated that house prices are likely to "flatline for a year or so", although in the light of the credit crunch and the wait-and-see approach to interest rates of the Bank of England monetary policy committee (MPC), which has spoken of uncertainty about how the economy will turn and expressed unanimity in holding rates for two successive months, this prediction may not be certain. However, one can hypothesise a situation where, as long as consumer prices index inflation remains below the government's two per cent target, interest rates will fall and the housing market pick up again as a result.

The possibility of such a cut taking place has now been hinted at by MPC member Andrew Sentance, who told the Guardian today that factors such as the credit market situation could exert "downward pressure on inflation", which the MPC would "take into account" when setting rates. Already, the paper notes, analysts are tipping a November rate cut, so such a move will not be a surprise.

Yet whatever happens to interest rates, the economy at large and the housing market in the coming months, the message about the long-term stability of the buy-to-let market is clear: those who are geared up for such an approach, Mr Boulger has stated, will sail into calmer waters in due course, while only those who have chased the quick buck have lost out.

Earlier this month, the Association of Residential Letting Agents published research showing that just 2.5 per cent of investment landlords were looking to make a short-term profit. On the basis of that research, it is only that small minority who may have their fingers burned. Most, it seems, have approached their investment in the right manner.

Jim Barnaby is a real estate investment broker and successful property investment adviser delivering research and selected UK and overseas property investment solutions with experience in spanish properties, french property investment, German property, Cyprus holiday homes, Property Cape Verde, German property, German property investment, buy to let property