According to Belvoir Lettings, which has offices across the country, the UK is moving closer to being a nation of renters like many of her continental neighbours. The firm points out that some estimates indicate that the private rental sector could make up 20% of the homes market by 2021.
‘Belvoir predicts that in 2014, the number of people choosing to rent will continue to drive up demand. There are real indications of a recovery in the housing market with property prices predicted to rise, along with a projected 25% increase in buy to let mortgage lending and with this we expect to see the re-emergence of more and more investment minded landlords looking to capitalise on this trend,’ said Dorian Gonsalves, chief executive of Belvoir Lettings.
He pointed out that a considerable number of landlords entering the sector over the last five years have been accidental landlords forced into the market because they could not sell their house but in 2014 some of these are expected to take advantage of rising prices in order to make modest gains and exit the market.
‘We now anticipate that over the next few years, new rented housing stock will come from different directions, partially from institutional investors returning to the market to provide much needed funding,’ he explained.
It is expected that the pre-2008 trend when landlords sought out an increase in capital growth on top of rental returns is likely to be adopted again in 2014 as more landlords look for real capital gains over the next three to five years, or even longer.
‘With bank and building society interest rates still currently at a very low level Belvoir offices are also dealing with more and more enquiries from first time novice investors who are seeking a better return on cash,’ said Gonsalves.
‘We predict that buy to let will become increasingly attractive and accessible for smaller investors who want to add another asset class alongside their existing savings and pension portfolios,’ he explained.
He added that the extra housing supply coming on stream via new investment sources should also provide a further boost for landlords but warned that despite media headlines to the contrary, UK wide residential rental incomes have not kept pace with inflation, year on year. In some parts of the country they only increased by around 1% and 2% in 2013.
Indeed, tough economic conditions and relatively high unemployment meant that many landlords were unable to raise rents, but they did benefit from tenants who occupied properties for longer periods.
‘Belvoir offices are noting that a growing number of people are taking the conscious decision to rent because it offers very good value. Tenants are secure in the knowledge that they can live in well managed and maintained property that is both flexible and easy to budget for,’ Gonsalves pointed out.
‘Whilst landlords always need to ensure they invest in the right property and be aware of local market rents, they must also remember that a good tenant who looks after a property well will actually be worth more to them, by taking out longer tenancies and reducing potential void periods. It's a win, win situation,’ he added.
He also said that although increasing property prices will be good news for existing landlords, for those new to buy to let investment, or looking to expand their current portfolio, it could be tough to find the right deals in 2014 as most areas across the UK are reporting a lack of property for sale, making it increasingly difficult to find a property that stacks up financially.
The firm is predicting modest rent increases in 2014 as the needs of tenants will continue to push up demand for quality accommodation. However landlord investors will still need to do all the correct checks and balances to ensure they realise the best, trouble free returns from their properties.
