Davis comments: “Over recent months, the city has seen a vast increase in the number of accidental landlords, due to the fact that they have been unable to sell their property. And the rules of supply and demand apply, meaning that property rental prices have levelled off. Overall I do not believe they are falling – there remains plenty of potential for many to make long-term gains.
“What this new breed of landlord needs to remember is that, today, tenants in London are looking for one- and two-bedroom properties, primarily in zones two and three. It is these types of property that are still commanding healthy rents.”
Davis believes that there is minimal likelihood of a return to 100 percent mortgages in the next five years. He adds: “It is this level of gearing that got the UK economy into recession in the first place.
“The affordability gap for becoming a homeowner has grown yet further. And, the situation is reinforced by the fact that there are a large number of social factors preventing tenants from becoming homeowners. There is now also real uncertainty in the job market, leading to rentals having become the preferred option.”
Davis considers that the UK (primarily London) is already seeing a shift towards a more European model of renting. As recently published in the English Housing 2007-8 report, 32% of people under 30 were buying with a mortgage against 45% who were renting. In 2001, those figures were 40% who purchased with a mortgage and who 33% rented.
Davis comments: “For Landlords wishing to increase portfolio, they should note that yields are much higher today than they were 12 months ago.
“Interest rates are at an all time low, which presents a real opportunity for residential property investors. They just need to get their proposition right, and to target the market effectively. However, it is important to remember that property is a long-term investment game – don't go into it expecting to get rich quick.”
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Interesting article. I agree. I think the youth in the UK will start to rent more. It makes more sense.
ReplyDeleteI don't really get why people want to spend hundreds of thousands on a house that will take them 25-30 years to pay back, as well as maintenance costs.