Parents fuelling buy-to-let bonanza

Latest research suggests that parents eager to give their children a foothold on the property ladder are among the biggest factors fuelling the current buy-to-let boom.
Generous parents make up nearly 25% of those planning to invest in buy-to-lets over the next 6 months, and have been encouraged by strong property prices and annual government tax relief of around £2bn for property investors.

According to a report from Birmingham Midshires, 31% of over-55s said they were intending to move into the area of property development.

Despite this surge of interest, finance experts warned that new legislation was making it more difficult for first-time investors.

Stringent fire and safety rules, mandatory licenses for houses in multiple occupancy and a new scheme to place deposits with a third party are now pushing up the cost of being a private landlord. Under the new deposit protection scheme, tenants pay their deposit to an independent third party who decides if it should be returned to them when they leave. Designed to stop unscrupulous landlords hanging on to deposits without good reason, the scheme nevertheless demands that landlords pay a fee for the service.
Lisa Taylor, from financial advice website, Moneyfacts.co.uk, said: "The buy-to-let sector has only been established as an industry for 10 years and in recent months there has been an increasing drive to impose greater regulation. Most of these regulatory changes will cost landlords, so it is important parents are aware of them before they decide to take the plunge."

The government has come under pressure recently to scrap tax relief for landlords amid growing concern that first-time buyers are being frozen out of the current property market.
Recent research by The Guardian showed buy-to-let investors enjoyed tax relief worth £2bn in 2006, while first-time buyers got none whatsoever.
As recently as 2000, tax relief for landlords stood at just £200m a year, but huge recent growth is likely to push it up to £3bn by 2008, eclipsing even the amount spent by the government on social housing.

"There is certainly a danger that the buy-to-let phenomenon is skewing the housing market," said Ms Taylor. "Whether new legislation will redress this imbalance in favour of the first-time buyer remains to be seen."