House price, what do they mean?

House prices – what do they mean to landlords?

As house prices continue to creep up across the country, albeit at a slow rate of growth, analysts are paying close attention to the size of rental incomes across the UK. Historically, when there is a larger than average gap between house prices and rental costs, by ratio, it signals an impending drop in house prices or rental cost. For example, if house prices have risen much higher in comparison to the average rent, house prices may have bloated to an unsustainable high, indicating a potential drop.

For landlords, any potential drop or rise in house prices can impact business and profit. House price drops can reduce demand for rental properties, leading to lesser rental values. Of course, house price falls are not all bad for residential and commercial landlords: an opportunity arises to invest in additional properties, to increase your rental portfolio at a reduced rate. Rises, on the other hand, can increase rental demand due to affordability issues with buyers, thus increasing rental values.

As a landlord of a rental property or portfolio, it is worth keeping abreast with house price trends in order to prepare for the inevitable shift. Being organised and aware of current happenings in the property market will ensure that you can adequately protect your investments, keeping your business as a landlord afloat, even in the toughest of times.