The rental market – predictions and forecasts

Landlord Expert
By Landlord Expert August 31, 2012 07:53

It has recently been reported that buy-to-let investors are set to make a rather handsome return on their investments during the course of the next 13 years. This has come as a result of increasing rental prices and the fact that house prices are beginning to recover; this has enabled a further boost to the property market.

So, what does the future hold?

Rental Prices

The Royal Institute of Chartered Surveyors (RICS) has stated that over the course of the past year, rental prices have risen by 4.3%. This can be largely attributed to the fact that mortgages are still difficult to come by whilst the demand of property hasn’t been particularly high.

Furthermore, RICS have predicted a 3.9% rise in rental prices within the next 12 months. This prediction is based on the fact that they have found that demand for rental properties has continued to climb whilst supply has remained fairly stable.

Additionally, regional variations have been flagged up by the report. In the North West, for example, rental prices have increased by 6.9%. The increase in rental prices has concerned a number of experts in the industry.

Peter Bolton King, global residential director at RICS, has been quoted saying: “While tenant interest is still riding high, what remains to be seen is whether many are willing to meet the increasing rents being demanded by landlords. However, it is clear we have seen rents grow steadily right across the UK for some time. This is partly down to the problem of the scarcity of mortgage finance and the large deposits required by lenders.”

Future Forecasts

Future forecasts for the rental and property markets have predicted a 2% increase in house prices per year in real terms from now until the year 2025. It is largely thought that there will be a shortage of supply later in the decade once demand has returned back to the levels we saw pre-recession. This prediction is, however, a modest one. Particularly when one considers the fact that in the last 30 years till 2007 there was a 4% year on year increase in prices.

With house prices predicted to begin increasing, now seems to be the optimum time for landlords to establish a strong property portfolio. Those that are able to build a portfolio now will benefit in years to come, particularly if rental prices do increase. Landlord insurance will be even more affordable for those landlords cashing in on multiple properties.

However, John Hawskworth, PwC’s chief economist, has been explaining that “housing is a potentially risky asset as recent experience makes all too clear.”

The rental market, for landlords, is therefore by no means a guaranteed source of substantial income. Whilst everything points to the idea of landlords benefiting from current conditions, the financial climate is still a difficult one to predict and property can still cause a bit of an economic sting, particular if your property is left vacant for a substantial amount of time. Being a landlord is no easy ride! It’s essential that all existing landlords and potential landlords thoroughly research the areas they are looking to invest in to ensure they will have a healthy turnaround of tenants with minimal vacant periods.

Landlord Expert
By Landlord Expert August 31, 2012 07:53

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