Buy-to-let investors have been quick to react as the economic downturn reshapes the lettings market and are increasingly looking to pick up new build properties at much lower prices, reveals research by ludlowthompson.com, London’s lettings agent.

According to ludlowthompson.com over a third of buy-to-let investors (35%) are planning to increase their holdings in residential property as a result of the fall in property prices. Of these over a quarter (26%) plan to buy new build properties, up from just 9% six months ago. (Full survey results below)

Stephen Ludlow, Director of ludlowthompson.com, comments: “New build properties have had a torrid time in the last year, contributing more than their fair share towards the overall fall in residential property prices but signs are now emerging that the prices of these properties may finally be low enough to attract interest.”

“Whilst a growing proportion of investors will now be attracted by the scale of the falls in those property prices we would sound a note of caution. Although prices of new build properties have fallen heavily as developers struggle to clear stock they are still being priced at a premium of up to 20% over the price of an equivalent property that is five or ten years older.”

“This premium erodes quite rapidly so you need to ensure that the discount you get reflects this.”

Stephen Ludlow explains that the “wow factor” of a brand new apartment initially makes it far easier to let but once the initial shine comes off the property voids can increase especially if they are in areas saturated with other new builds.

ludlowthompson.com points out that although interest is growing in new build properties older properties such as Victorian terraces are still more popular investments with 74% of landlords looking to increase their holdings in residential property favouring older properties.

The research reveals that 31% of buy-to-let investors have no intention of selling their properties and those who do plan to wait an average of 19 years before putting their property on the market. ludlowthompson.com says that the majority of investors tend to take a very long-term view on their buy-to-let investment, usually intending to hold them to retirement and beyond and do not enter the rental sector in order to make short-term gains.

Adds Stephen Ludlow: “It is often overlooked that on average over the last year residential property has actually fallen far less in value than both UK commercial property and the UK stockmarket. Recognised indexes show that the value of residential property fell 16% in 2008 compared to a 26% drop in the capital value of UK commercial property and a 31% fall in value of the FTSE 100 for the same period.”