The
UK continues to edge ever closer to its European neighbours by becoming a
nation of ‘renters’. There
has been rapid growth in residential lettings, with over 15 per cent of all UK
homes (3.2m) now in the private rented sector. Some
Government estimates expect a further rise of 33 per cent in the residential
rental market over the next eight years – taking private rented property to 20
per cent of all UK homes by 2021.
“Over
the past year the private rented sector has remained on a firm footing and
despite Government ‘pump priming’ initiatives such as the ‘Help To Buy’ scheme
there has been no real impact on the continued demand for rental property,”
says Dorian Gonsalves, Chief Executive Officer of nationwide lettings experts,
Belvoir.
“All
of our predictions are that in 2014, the number of people choosing to rent will
continue to drive up demand. There are real indications of a recovery in the
housing market with property prices predicted to rise, along with a projected
25 per cent increase in buy to let mortgage lending. With this we expect to see
the re-emergence of more and more investment minded landlords looking to capitalize
on this trend.”
A
considerable number of landlords entering the sector over the last five years
have been ‘accidental landlords’ – people who, for one reason or another,
couldn’t sell, so decided to rent out their properties instead. In 2014 some of
these are expected to take advantage of rising prices in order to make modest
gains and exit the market.
“What
we now anticipate is that over the next few years, new rented housing stock
will come from different directions, partially from institutional investors
returning to the market to provide much needed funding. It
is pre-2008 since landlords sought out an increase in capital growth, on top of
rental returns and this strategy is likely to be adopted again next year as
more landlords look for real capital gains over the next 3 to 5 years, or even
longer.”
With bank and
building society interest rates still currently at a very low level we are also
dealing with more and more enquiries from first time ‘novice’ investors looking
for a better return on cash. We
predict that buy to let will become increasingly attractive and accessible for
these smaller investors wanting to add
another asset class alongside their existing savings and pension portfolios. Whilst
landlords always need to ensure they invest in the right property and be aware
of local market rents, they must also remember that a good tenant who looks
after a property well will actually be worth more to them, by taking out longer
tenancies and reducing potential ‘void’ periods. It’s a win, win situation.
Although
increasing property prices will be good news for existing landlords, for those
new to buy to let investment, or looking to expand their current portfolio, it
could be tough to find the right deals in 2014. Most
areas across the UK are reporting a lack of property for sale, making it increasingly
difficult to find a property that ‘stacks up’ financially. If anyone is looking at buy to let this year it is essential to seek
independent advice, not just from lettings professionals such as Belvoir, but
also from financial advisors and tax experts who can assess the impact of
adding property investment to individual investment plans.
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