A challenging year ahead, here we look at what will disadvantage and detract from the buy-to-let market while also remaining positive and offering commentary on the options and alternatives and the way forward.

Rent Arrears: After seeing at least 15 per cent wiped off the value of property investments within the past year, it seemed that landlords on variable-rate mortgages could at last breathe a sigh of relief thanks to the recent swathing cuts in the base rate. However the spectre of rent arrears has surfaced. As we find ourselves at arguably the lowest point with the acknowledgement that we are officially in recession. With unemployment in the UK likely to rise by 700,000 by the end of 2009 (unemployment standing at around 1.61 mln during the three months to January).
Rent guarantee insurance policies and Landlord Assist, a dedicated service run by property law experts to secure property and arrears of rent for landlords.

Buy-to-let lenders and Loan to values: The loss and subsequent takeover by Banco Santander of Bradford & Bingley in September 2008 with the loss of over 2,000 jobs was the beginning. Their specialist lending arm Mortgage Express withdrew products from the market in September, TMB (Part of HBoS) withdrew products in August 2008, and Two subsidiaries of Nationwide, the Mortgage Works and UCB, temporarily withdrew their buy-to-let mortgages in September. However there still remain a handful of lenders (including a few mainstream) offering competitive products to 75% loan to value but with some criteria restricting loans to remortgage only. Whether we will return to the previous offerings of 85% loan to value remains to be seen. To see 80% we feel would stimulate the market somewhat while also injecting some much needed confidence into the sector. A handful of best buy-to-let mortgages is maintained and handpicked by First Mortgage Trust.

Property values: Many 'experts' and commentators have given their predictions for 2009 as a fall of around 10%, these include RICS, Hometrack and The Treasury while The Nationwide and Halifax have 'very sensibly' declined to comment, perhaps feeling that any commentary or prediction would impact on the market further. However on a more positive note from the Royal Institution of Chartered Surveyors (Rics) who reported that “buying interest is now at levels not seen since 2006.” The base rate cuts stimulating the market coupled with discounted properties. We feel that the bottom of the market is nearer than many think and would cite quarter 2.

Rental demand: Rents are being pegged back as a result of the weak sales market as failed or frustrated sellers put their homes up for rent. The majority of rental demand typically falls within the £500 to £750 pcm bracket and rentals have been rising relatively quickly as demand has risen on the back of weak confidence and lack of mortgage availability in sales. However, there is a limit to how high rents can go and will be constrained by affordability. Rental growth in this sector was running at 8pc in the middle of 2008, in 2009 we would predict rental to remain broadly flat. In November of 2008 we reported on rental demand decline 'UK rental falls for first time since 2003'

Rental cover on buy-to-let mortgages: We have returned to more cautious rental cover of around 125% of rental, it is fairly safe to predict that a return to 100% rental cover or anywhere thereabouts is pure fantasy. Rental cover of 125% reflects stricter criteria and caution and we would expect this to be maintained for the best part of 2009. If rental cover is an issue a product is available on an affordability model.

Legislation: Just when buy-to-let landlords thought it couldn't get any worse from the 1st October 2008 and Energy Performance Certificate was required. The wider opinion was an EPC was a fairly non descript and fruitless piece of legislation and fairly low on the list of prospective tenants. All an EPC confirmed was further tinkering hot on the heels of Tenant Deposit Schemes and HMO's and HIPs. People choose a rental property based on rent, location and wow factor. The European directive on energy efficiency, which inspired the EPC, insists only that certificates be renewed every 10 years, which again seems a complete anomaly. The ratings are from A through to G, A representing an energy efficient property and G something akin to a tent in the back garden. Furthermore there is no compulsion or criteria that places the onus on a landlord to improve the efficiency of a property from G. 2009 appears to be, thankfully, free of any new or proposed legislation for the buy-to-let market.