LONDON, Nov 9 (Reuters) Buy-to-let is now a rich man's game, a report says.
The Royal Institute of Chartered Surveyors (RICS) says the buy-to-let market is now so inaccessible to the average investor that only the wealthy can afford to become landlords.
Rising interest rates and rental cover ratios for mortgages have made investment an unattractive proposition for vast swathes of the population, it says.
Prospective landlords must generally prove that rental income will exceed 125 per cent of mortgage repayments.
Would-be-investors must now have 500 per cent more capital to put down as a deposit than they did five years ago -- 65,600 pounds (30 per cent of the average property value) compared to 10,100 pounds (just 8 percent of the average property price) in 2002.
RICS senior economist David Stubbs said: ''It takes more capital than ever to set up a buy-to-let investment.
''Would-be investors who have missed out on the impressive returns of previous years are now finding the hurdles to property investment are higher than they imagined.
''However, existing landlords should be able to use the equity in their past investment properties to fund the deposit needed for new ones, and this should ensure that demand from the buy-to-let sector does not dry up entirely.'' The group -- which has 140,000 members and represents the work of property professionals in 121 countries -- also said affordability could improve in future.
With rents rising and house prices predicted to remain flat in 2008, yields on residential property could increase slightly.
Interest rates are also expected to be cut, lowering the deposit required to meet rental cover ratios.
REUTERS AM ND0948