Designs on Property Rental Market Update
publication date: Jan 6, 2012
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author/source: Kate Faulkner, Property Expert and Author of Which? Property Books
Designs on Property Rental Market Update
Past Rental Market Performance
Typically with buy to let (BTL) investment, the longer you hold the property for, the better the returns you will receive. This will always be true as long as prices rise consistently and rents can be increased to cover any buy to let costs. Unfortunately, the credit crunch which hit in 2007, has meant those who have invested since that time haven't necessarily done as well, both from a capital growth perspective as well as a rental perspective. Much of the media has concentrated in 2011 on headlines such as the BBC's title ‘private rents still rising' and the Guardian in September claiming August rents rose by a ‘record amount'. Unfortunately what the media didn't cover back in 2008 was the rent falls which ranged up and down the country from 5-20%, so the real headlines for 2011 should have been ‘rents recovering from lows of 2008'! Overall, from a landlord's perspective, depending on when they invested, the market is looking pretty perfect. Landlords who invested pre 2005 Rents are either stable or rising with only a few areas showing slight falls in 2011. Although property prices have fallen (bar Central London) since this time, overall those investors who bought pre 2005 would have seen big enough increases in property prices to ride out the recent falls. The only exception to this is amateur investors; especially those who invested through property companies who it's apparent sold stock at far higher prices than were sustainable, especially in the City Centres. Surprisingly though, many of these haven't gone under, but are either pumping money into their investment in the hope it will recover long term or the banks have taken the renting and running of the property over to avoid a forced sale and losses all round. For those that have primarily invested for income (yield), the capital growth or lack of it will have little bearing as long as LTVs are 75% or less, good rents and tenants staying longer in properties all help reduce the overall costs of running a buy to let property. Landlords who invested post 2005 Unless a great deal was secured on the property, or the buy to let (BTL) was to generate income rather than capital growth, those reliant on rising property values are probably having a tough time. The key to how bad things are for landlords in this situation will depend on how highly leveraged (or geared) they are. Those with properties bought post 2005 with loan to value (LTV) ratios of 80% or less, may struggle to re-mortgage and others who are on very low mortgage rates may find it difficult to fund their BTL when interest rates return to a more normal 5% and mortgage rates could be as high as 7%. In summary, according to Paragon Mortgages:- "Buy to let is a UK success story - strong growth allied with excellent credit performance. The sector is helping to meet genuine consumer demand, improving both choice and standards for tenants, whilst providing an alternative asset class for investors wanting diversification." Source: Paragon Mortgages: The UK private rented sector and buy to let market 2011 ALSO READ - Current Rental Market Performance and Rental Market Outlook for 2012 NEED HELP FROM THE DESIGNS ON PROPERTY EXPERTS? Email enquiries@designsonproperty.co.uk for a one of our FREE Property Checklists. Do you have a property question? GET AN INDEPENDENT ANSWER! ASK US via our PROPERTY FORUM, email enquiries@designsonproperty.co.uk or call 0845 838 1763.
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