2012 to be an olympic year for buy to let

Landlord Expert
By Landlord Expert January 30, 2012 20:59

This summer, the UK will play host to the much-hyped London 2012 Olympics, with the hope that the economy and the property market will have regained their footing in time for the games.

However, experts are warning that this won't be the case, with the housing market likely to continue its lacklustre performance. In fact, many data providers and economists believe house prices are likely to remain at their current levels, as the deteriorating economic environment casts a shadow over the market.

In 2011, experts predicted a wide disparity in price movements across the country, with London experiencing the biggest gains. They've been proved right: data provider Acadametrics reports house prices in London rose by 3.1% in the 12 months to the end of November last year, but in all other regions of England and Wales values fell.

In addition, property website rightmove.co.uk says house prices in the south of England are now double those of the north and Wales - with this divergent trend set to continue into 2012 and beyond.

Estate agent Strutt & Parker goes a step further and labels this year as "the year of the great divide" - between the north and the south, and between London and the rest of the country. The capital, in particular, is expected to outperform every other region in 2012, with prime and super-prime property forecast to prop up the market.

Meanwhile, the buy-to-let market looks set to flourish. The rental market saw strong growth last year - rents in England and Wales rose for the ninth consecutive month in October, according to LSL Property Services - due to continued downward pressures on first-time buyers. The National Association of Estate Agents reported that the number of house sales to first-time buyers fell to a three-year low in October.

As a result, average rental prices will increase by around 3 to 4% in 2012, according to Martin Bikhit, managing director of central London estate agent Kay & Co. Stuart Law, chief executive of Assetz, goes further, saying rents will continue to grow strongly at around 5% plus, as restricted mortgage lending and poor employment prospects leave a "whole generation of potential first-time buyers with little prospect of buying a home".

He adds: "Consequently, landlords are set to benefit from another year of strong yields, albeit alongside only modest capital growth."

Caroline Kavanagh, group lettings director of Townends estate agents, says: "Mortgage finance has eased within the buy-to-let market, providing those wishing to invest with greater opportunity." As other investment options continue to give little in return, Kavanagh predicts property will become an increasingly attractive and a viable long-term investment.

Phil Rickards, senior manager at BM Solutions, the buy-to-let arm of Lloyds Banking Group (LLOY), cites a high level of confidence among landlords, "robust" tenant demand and homeowners choosing to let their property rather than sell it as reasons for a strong buy-to-let market in 2012.

"One of the most positive impacts on the market in the past year has been an increase in competition," he adds. "We've seen some lenders return to buy-to-let, and we've also been joined by some new entrants. This is really good news for the market as a whole."

However, Paul Diggle, property market economist at Capital Economics, says that while buy-to-let demand has been the "one bright spot" of the stagnant property market, the negative outlook for the UK economy is likely to keep a lid on the market.

"Landlords are not immune to the problems of the wider economy," he says. "Job losses, negative pressure on wages and rising rents mean we are less bullish on both the rental and the buy-to-let market."

In terms of house price predictions, Law forecasts a house-price increase of 3% in 2012. "The property market in 2012 is likely to continue in a similar vein as it has both in 2011 and in 2010, with relatively flat house prices buoyed overall by a strong performance in key locations, particularly London and upmarket commuter hotspots in the South East," he says.

Lee Watt, managing director of estate agent Kinleigh Folkard & Hayward, is also pencilling in an overall increase of 1 to 2%. Others aren't quite so bullish, though. Economists at Schroders are forecasting a 6% drop in house prices, dragged down by falling prices in the north of England, while both Nationwide and Halifax, which publish monthly house price indices, admit prices will continue to remain sluggish and mostly flat in 2012.

Landlord Expert
By Landlord Expert January 30, 2012 20:59


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