The downturn in property sales is having a positive affect on buy to let according to a survey of residential lettings by the Royal Institution of Surveyors (RICS). It appears that weaker demand to buy houses has forced would-be sellers back to the rental market where yields are rising. RICS is reporting a rise of 29 per cent for the quarter to April, in instructions to let property. This compares to a 2 per cent fall three months before. A spokesperson from RICS said: ‘Many are taking advantage of rising rental yields while they wait for the credit crisis to abate’.

This has been confirmed by Paragon, the UK’s third largest buy-to-let mortgage provider, which yesterday reported a 39 per cent fall in first-half profits. The company has effectively been closed to new lending because of the credit crisis, receiving just £988 million in the first half of the year compared with £2.12 billion for the same period in 2007, however it stressed that its £11 billion mortgage book was ‘high quality’ with an average loan-to-value of 66 per cent. Paragon chief executive added that professional buy-to-let investors may even see this as ‘an opportunity to buy properties at attractive prices’.

Meanwhile the value of mortgages agreed by the Nationwide Building Society last year fell 40 per cent as credit conditions led it to scale back lending. The building society said it does not expect the worst of the credit crisis to be over until the first quarter of 2009 at the earliest. It’s pre-tax profit rose 5.2 per cent for the year to 4 April.

The director of the Institute for Fiscal Studies has warned the government’s abolition of the 10p income tax rate would hit homeowners heavily. Pumping so much money into the economy would send inflation higher which would mean that the Bank of England would need to keep interest rates on hold or push them higher, putting pressure on the mortgage market.

The chairman of the Home Builders Federation said yesterday that sales of newly built houses have ‘fallen off a cliff’ in the past few weeks. And problems are escalating rapidly despite intervention from the Bank of England: ‘The slowdown last autumn was minuscule compared to what we are seeing now… The implications for the economy are dire. Tens of thousand of jobs are at risk, possibly even more…’

And finally, although one of its towns is on the shortlist, Harborough District Council in Leicestershire has officially aligned itself with a protest group set up against proposals for eco-towns. Councillor Steve Charlish said the government’s process of consultation was unsatisfactory and needed to happen in public view. ‘Even now the community hasn’t really got an idea of what’s going on… There is a lot of fear from the community about the whole process’.