Renting and Letting Market Commentary March 2009

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Unlike the buying/selling market, the number of people renting is at it's highest from many years, with  around 14% of people renting in the UK. Just over a year ago, many pundits were 'laughing' at the 4-5% of returns that Buy to Let investors were making, due to the 8% returns you could receive from a bank account. How quickly things change! In just over a year, these returns are starting look fantastic in comparison to any other asset class you could invest in!

The increased number of tenants has been matched and even over taken with number of frustrated sellers who are now renting their properties out. Some developers of new build are also adding to the rental property supply. The result is increased competition in many areas and that is increasing void times and properties which are not priced competitively are being left empty for months. The other threat to landlords (and tenants) is being made redundant, so now more than ever both tenants and landlords need to protect themselves from this danger.

For more indepth rental market views, read Belvoir Lettings' latest 'Regional Rental Report' here.

Expert Commentary
Mike Goddard, Chief Executive, Belvoir Lettings
Belvoir's Rental Index shows that the average monthly rent across the whole of the UK in March was £695 a rise on February's figure of 0.44% and taking the annualised change in rent into positive territory (5%) for the first time this year.  From our figures the average rent has certainly been in gentle decline since Summer last year and this month's upwards movement may be the first signs of a recovery in the market. 

The lettings market has of course been affected by the huge influx of owners who have been unable or unwilling to sell (the so called 'reluctant landlords') and this has put some downward pressure on rents across the whole of the UK.  Furthermore, in many areas, there has been a slow down or even reversal in the number of migrant workers looking for rental accommodation and this again has put some downward pressure on rent levels.

Keshav Thukaram, Managing Director, Smartlandlord
The sales market for family homes is picking up again, and the tide of frustrated sellers renting out their homes is retracting.  This drop in supply means rents at the top end of the market could begin to creep up again, albeit at a very slow pace for as long as the economy remains fragile.  But first time buyers are still struggling with restrictive mortgage criteria, and only those with very large deposits are able to make the step onto the property ladder.  This means that rental demand for smaller homes remains strong, but supply is also high as owner occupiers on the bottom rung continue to rent out their unsellable properties.

The current economic climate is forcing more people into higher education and the number of self employed is also increasing.  This is pushing up tenant demand and on the whole, rents will remain fairly stable for the rest of this year.  Yields are looking attractive and with the housing market nearing the bottom many landlords are looking at expanding their portfolios.  But despite the financial aspect of property investment currently looking attractive, rising unemployment among tenants poses a big risk to regular returns.  Landlords should make sure they protect themselves by taking out rent guarantee insurance against late rental payment and default.

For more market commentary on a national or local level:-
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