According to two reports, buy to let investors will make a steady return on their investments over the next 13 years. This is a result of rising rental prices and that house prices are recovering which is boosting the property market.
Rental Market
Over the last year rental price have increased by 4.3 per cent and they don’t look to be slowing down. This is a result of mortgages not being widely available and that there is not much new stock on the market of a high quality. This is according to the Royal Institute of Chartered Surveyors (RICS)
They predict that rental prices will increase further by 3.9 per cent within the next year. This is a result of in the last three months supply of properties has been flat where as demand is rapidly growing. This has been the case since the beginning of 2009; however since then the gap between supply and demand has narrowed.
Variations
The reports also highlighted regional variations. Those who are looking to rent in the North West will now have to pay an extra 6.9 per cent than before however in Wales rental prices have remained the same.
Not only are people struggling to come up with deposits which are trapping them in the rental sector but they can’t afford the extras that come with buying a home: legal fees and landlord insurance among others.
Peter Bolton King is the global residential director at RICS and he has said, “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.”
The Future
It has been predicted that between now and 2025 house prices will increase by two per cent a year in real terms. This is predicted to be a result of a lack of homes later on in the decade when demand reaches back to normal levels. However this is a modest increase compared to the last 30 years which has seen a 4 per cent increase each year till 2007.
PwC’s chief economist, John Hawksworth has said, “Given that housing returns will not be perfectly correlated with returns on equities and gilts, including housing, an investment portfolio together with these other assets could have some advantages in terms of diversifying risk.
“However, any such decisions need to be based on a detailed consideration of individual investor circumstances and needs to bear in mind that housing is a potentially risky asset as recent experience makes all too clear.”