Is This A Good Time To Get Into Rental Property
Thanks to the credit crunch and the general lack of confidence in the property market, it’s an interesting time to sell or buy a house at the moment.
It’s certainly a buyer’s market. And while it’s only house price growth that’s slowing, rather than prices themselves, it’s not clear whether there are “bargain” purchases to be had.
So if you’re thinking of becoming a landlord, is this a good time to buy rental property? We take a look at recent stories to see what the general consensus is.
The first story from the UK’s largest letting agent Your Move suggests the answer is yes. It says there was a 21 per cent increase in the number of new lets starting in January and February this year.
Its research has shown that the credit crunch has caused a distinct increase in demand for rental property from tenants. And that’s a trend that is likely to continue.
It’s believed to be caused by people delaying their property search for a home to buy, because of the way the market is at the moment. In particular first time buyers without savings are finding it hard to get a good mortgage deal. So landlords who can leverage a sizeable deposit have an opportunity to buy and rent out.
Figures from the Council of Mortgage Lenders seem to confirm these findings. Its figures show buy-to-let lending came to more than £24 billion in the second half of 2007. That’s up from £21 billion in the first half of the year, which itself was a billion up on figures from the second half of 2006.
More good news for people with rental property from the Association of Residential Lending Agents. Its research shows average rents in the UK have continued to increase dramatically over the last three months.
Between December and February the average rent for a UK house went up by four per cent, and 2% for a flat.
The association represents professional letting agents, and says its records show that when property prices slow or fall, demand for rental property shoots up. The proportion of its members reporting they have more tenants than properties is at its third highest level since records began six years ago.
More good news, this time from Which? magazine. The consumer watchdog says it’s still possible to make a profit in the UK property market, despite the decline in price growth.
It has published its latest Property Investor’s Handbook, which says that investors with the guts to take risks will still be rewarded. Which? actually recommends that instead of getting into rental property, you look at less conventional property investments. Suggestions it gives include buying a number of homes off-plan from a property developer, before selling them off one by one to buyers. Risky but with the potential for huge profits.
Another strategy it suggests is to snap up old commercial property and convert it into residential homes. Or to gang up with other investors and form a property fund to buy valuable land for construction.
It all looks good, but we’ll give the last word to the Royal Institution of Chartered Surveyors (RICS). Earlier this month it revealed that demand for residential rental property continued to grow during the fourth quarter of 2007.
There is a caveat to that – the rate of growth in the market fell for the second consecutive quarter and is now below the long run average for the sector. More than 82% of all properties were rented to individuals.
So, if you choose to become a landlord, this does seem to be a good time. Good luck!
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