Introduction

Investment in property , or buy-to-let as it has become known in the UK, from a standing start a decade ago has become a market sector worth £94.8m in 2006, according to the Council of Mortgage Lenders. The first ever buy-to-let mortgages in Britain were introduced in 1996, and since that day more than three million of them have been written. In the process tens of thousands of Britons have become landlords and property entrepreneurs, many of whom have made significant profits from their enterprise.

Arguably, buy-to-let has itself played a part in underpinning buoyant house prices, with record breaking levels being achieved in the past ten years. Capital growth in the UK has risen by 213% since 1997 in the UK, according to The Economist. Only South Africa's and Ireland's property markets' have recorded higher inflation in the last decade; even Spain, whose property market we hear a great deal about, has only registered house price increases of 190% in the last decade.

A cooler investment market

In 2008 the buy-to-let market in the UK has cooled. Rising interest rates over the past two years, combined with the increase in house prices over the past decade, have resulted in many landlords who bought in the last few years being unable to make a profit. Add into the mix falling house prices, and harder to obtain mortgage finance and the recipe for success is no longer assured.

The reason behind the flat buy-to-let market is two-fold. Firstly, mortgage criteria and higher interest rates mean would-be landlords are required to have larger deposits at their disposal. Secondly, those investors who buy primarily for capital gain - in 2002 house prices rose by 21.9% nationally - are concerned because capital growth will be modest in 2008.

However, all is not doom and gloom for landlords as the slowdown in the housing for sale market in 2008 is meaning that well located properties are achieving good rental income growth. Also new home developers who have stock they are having difficulty selling, may well be open to offers from professional investors who have access to mortgage finance.