How to beat buy-to-let investors to find your home sweet home

Lenders are loosening their grip on the purse strings. But just as mortgages become more readily available, first-time buyers are facing another barrier.

They are doing battle with cash-rich buy-to-let investors for properties at the lower end of the market. The latest survey by the Royal Institution of Chartered Surveyors shows a small rise in the number of homes for sale in Yorkshire but it is not enough to satisfy an insatiable appetite for property.

The supply and demand problem is pushing up prices and first-time buyers are losing out to those who want homes to let. Ian Briggs, of Dacre, Son & Hartley estate agents, says: “The buy-to-let rush has excluded first-time buyers from the market as sellers inevitably prefer to sell to investors who are able to secure funding upon very relaxed lending criteria.”

The problem has been exacerbated by the race to buy before the new stamp duty rate rise for additional properties is implemented. From April 1, investors and second home owners will pay an extra three per cent in stamp duty on all properties over £40,000.

While the odds may not appear favourable, there is hope for those hunting for a home. Rightmove believes that adverse taxes may deter would-be landlords after April and says first-time buyers will be encouraged by the government’s help-to-buy schemes and low interest rates.

Patrick McCutcheon, Head of Residential at Dacre Son & Hartley, says the key is to be prepared and to ask for help.

“First-time buyers need to get their mortgage agreed in principle prior to starting their property search. Like us, a lot of agents have their own mortgage advisors in-house these days, so it’s worth considering a meeting with an agent and a financial adviser at the same time to get a clear idea on the finance options available.

“It also helps if first-time buyers have regular contact with estate agents and make sure their local agents know exactly what they are looking for. Phone the agents regularly to check what’s new to the market and make yourself available for viewings as soon as possible. If you can’t view a property for a week or so the house could well have been sold within that timeframe.”

He also suggests asking local estate agents which geographical areas are much more investor focused so first-time buyers can consider alternative neighbourhoods nearby.

“When it comes to people selling their property, in the majority of cases cash is king with vendors tending to sell to the party that offers the best cash deal. Investors typically see a property purchase as a business transaction and deal in cold hard facts. They are therefore less emotionally attached to a purchase and, as long as the figures stack up, the sale will go through. That said, if it was a dead heat between an investor and a first-time buyer who had their mortgage agreed in principle, and the condition of the property meant that the mortgage application won’t get derailed, I think a lot of vendors would prefer to sell to a first timer. There is something comforting about knowing who will be living in your old home, and many people like to see the younger generation get a foothold on the property market, as they have all been there themselves.”

Buying new is another option. It is usually quick, easy and there is no chain and little chance of being gazumped or outbid. Martha and Chris Robertson-Jones used the Help-to-Buy-shared equity scheme to buy their first home at Miller Homes’ Quercus Green development in Harrogate. The scheme, which applies to new-build homes, offers assistance for buyers who have a deposit of around fiver per cent through the provision of a 20 per cent equity loan from the government. It means that they only need to secure up to a 75% mortgage from a bank or building society.

Martha says: “We looked at second-hand property in Harrogate but it was expensive and most needed some work that we couldn’t afford to do. We were looking in the £170,000 to £180,000 price bracket but buying new and using the Help-to-Buy scheme meant we could afford this house, which cost £225,000 and was ready to move in to with no work needed. The whole process of buying went very smoothly.”

*For more details on Help-to-Buy,including the Help-to-Buy ISA, which offers a 25 per cent cash bonus of up to £3,000, visit www.helptobuy.gov.uk

*New figures from the Association of Residential Letting Agents reveal a big incentive to buy a home as soon as possible. The average first-time buyer purchasing a property this year will have spent £52,900 on rent by the time they get on the property ladder and future first-time buyers can expect to spend 22 per cent more, according to the ARLA Cost of Renting report. Those who move out of their family home at the age of 18 will typically rent for 13 years before buying their first property. A fifth of those renting do not expect to be able to afford to buy a home and say that rising house prices and low wages are the main barriers.