Research by Ludlow Thompson showed that 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.

According to the London lettings agent, 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.

Stephen Ludlow, director of Ludlow Thompson, said: “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.”

According to Ludlow, the “wow factor” of a brand new flat initially makes it far easier to let but once the initial shine rubs off the property voids can increase especially if they are in areas saturated with other new-builds.