Let-to-buy offers escape from sluggish sales market

Let-to-buy offers escape from sluggish sales market

But the start of their new family coincided with the weakest housing market in years. The Nationwide says house prices fell 0.6 per cent in March, the property website Rightmove says it is taking an average of 73 days to sell a home, comparedwith 54 days a year ago, and the National Association of Estate Agents reports there are twice as many homes on sale today as in spring 2004.

So instead of selling their current property - a two-bedroom garden flat in Clapham, south London - Smith and Vueghs are letting it out and plan to leverage its capital value and rental income to boost their borrowing potential for their new property.

'The market's just about dead right now and we didn't have the time to wait to find a buyer and get into the delays of a chain. The flat's been valued at £300,000, but it might be that we would get only £275,000. So instead of the risk and delay, we're letting it out,' says Smith, who runs a building firm.

They expect to get £275 a week in rent and have bought a large house just four doors away from the flat. 'The house will give us the space we want, and we love the area and have friends here. It would have been awful to lose all that because we couldn't sell the flat,' Smith says.

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Young people form the backbone of the rental sector. First-time buyers are now aged 34 on average in Scotland and 32 in Greater London, the Midlands and the north east of England, according to research by the Halifax bank. But most people still leave the parental home in their early- to mid-20s, so rent for up to a decade before buying.

Business people who move when their firms relocate also rent, and increased demand from them is one reason why, according to a report by the Royal Institution of Chartered Surveyors, the rentals market is at its strongest since 2001.

But the let-to-buy trend is not new; it dates back to the housing market crash of 1990. 'Many owners were in negative equity and in theory couldn't move. But in those days rents were high in proportion to capital values, so some owners got enough income to secure a mortgage by letting out,' says Ray Boulger, a financial adviser with the mortgage brokers Charcol.

After more than five years of gently declining rents, lettings income alone will be insufficient to support a mortgage on a primary property for most people today - but it can help. 'We're buying an unmodernised six-bedroom house so we're massively stretched, and the rent will assist with our budget,' Smith says.

Abbie Cotton, of the letting agency Cluttons, says owners are 'mad not to give lettings a try' if they have the slightest problem selling.

'You get weekly income and can even negotiate with the tenant to allow viewings for potential buyers while they live there. If you accept an offer you can give two months' notice to the tenant and manage the sale in the interim,' she says.

But there are downsides. The rentals market has been volatile lately, and in some areas there is an excess of supply, so income cannot be guaranteed.