Rental guarantees for buy-to-let investors return to the capital

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Rental guarantees to encourage buy-to-let investors have made a return to London after six years without them in place. Barratt is paying 5% net at two developments in the capital – Renaissance, in Lewisham, and Waterside Park, Royal Docks.

The decision is a reaction to the resilient rental market – characterised by record demand from tenants and low void periods. Rental guarantees are a valuable enticement for off-plan homebuyers as a once-a-month sum is paid from the day of completion and the stress of finding and dealing with tenants is eliminated. Ordinarily, guarantees last for two years.

“Both are in areas of significant regeneration, where prices and rents are set to increase substantially over the next five years,” said Barratt’s director, Gary Patrick.

Renaissance is a 788-home scheme in Lewisham town centre, an emerging travel Zone 2 address with eight-minute train links to London Bridge. The starting price in the area is £181,000. The cost of flats at Waterside Park starts from £240,000.

Rental guarantees were prevalent before the credit crunch. Some lenders continue to be sceptical about this kind of incentives, saying that they artificially inflate asking prices.

Yearly returns on London buy-to-let properties have increased to 10.4%, as a result of rising capital growth, according to specialist estate agent Ludlow Thompson. Rental “yields” are typically 5.2%.

13th June 2013