Will I Be Able To Let
My Buy To Let Property?

Will I Be Able To Let My Buy To Let Property? (Sept 2011)

When you're thinking of investing in buy to let property, it's natural to question your ability to rent it out and keep tenants paying the mortgage.

The good news is that the current residential lettings market is very strong ... with most letting agents reporting a shortage of quality property available for rent. Even in places like central Manchester and Leeds, where a couple of years ago there was a massive over-supply of properties, is seeing a huge up-turn in the market. The Philip James Partnership, a letting agent in Manchester City Centre reports:

"Manchester's city centre rental market has taken off with gusto in the first quarter of 2011. We have let and re-signed 104 apartments in the first three months of the year with an average price increase of 5.94%. Nearly two-thirds of our properties have increased in value without a single rent drop – this is a record for our Deansgate office and we expect the trend to continue into the second quarter. From January to March we made our landlords an extra £15,228 in rental incometwo articles below should give you confidence".

"UK rental property demand keeps rising", new report shows

Demand for rental property continues to outpace supply in the UK, according to the latest Residential Lettings Survey, July 2011, from the Royal Institution of Chartered Surveyors.

Many people have continued to turn to the lettings sector and as a result of this, rents continued to increase, although the survey indicates that the pace of growth moderated slightly.

Some 34% more surveyors reporting a rise in rents rather than a fall compared with 42% in the previous three month period. Significantly, the imbalance between demand and supply is thought likely to persist with the survey results suggesting that further gains in rents are likely over the coming months, RICS said.

One of the main drivers of the strong demand for rental property continues to be would be buyers who have moved to the lettings market after struggling to find mortgage finance, or first time buyers unable to meet lenders’ deposit requirements. As a result, 25%more chartered surveyors reported a rise in demand than a fall.

However, the survey says that it is significant that the challenging economic environment is also leading to more tenants relying on assistance from the government. Social lettings are now at their highest level since the series began in 1999, at 13% of all new lets, up from 8%. Meanwhile, lettings to private renters continue to make up the majority of lettings, at 66%.

New landlord instructions, which indicate the flow of rental property coming to the market, continue to edge upwards albeit only modestly, with just 5% more respondents reporting a rise in new instructions than a fall. Surveyors report that where tenancies are coming up for renewal, some landlords, particularly those in London and the South East, are now choosing to put their properties on the sales market, leaving fewer rental properties available.

‘The combination of strong tenant demand and a limited stock of good quality properties on offer is pushing rents ever higher across much of the country. This is the case both for houses and flats,’ said RICS spokesperson, James Scott-Lee.

‘Moreover, with mortgage finance for first time buyers likely to remain in short supply for some time to come, this imbalance is set to persist. The inevitable outcome is that rents will continue to increase,’ he added.

Source: Property Wire

More families set to rent properties, Paragon

Almost half of landlords are letting properties to families due to a "constrained mortgage market" and wider economic difficulties, according to buy-to-let specialist.

Landlords are looking to invest in family-focused housing in the third quarter of this year, new data from Paragon has shown.

Paragon's Trends research showed that of those landlords planning to purchase property during the third quarter 41 per cent are looking to invest in semi-detached houses - up from 28 per cent in Q2 - and 22 per cent are looking to buy a detached property - up from 9 per cent in Q2.

Paragon claimed that it is a common perception that the private rental sector is largely made up of young people and couples as its research showed that a "sithat a "significant" proportion of landlords are letting to families and this "looks set to increase" during the coming months.

The research showed that 45 per cent of landlords have families as tenants, making them the fourth largest tenant type. Over half of landlords let to young couples, with 52 per cent letting to professionals and 50 per cent to young singles.

With increasing strain on the social housing sector, a constrained owner-occupied mortgage market and continuing wider economic difficulties, more families are looking to the private rental sector as their tenure of choice, claimed the buy-to-let specialist.

Nigel Terrington, group chief executive at Paragon, said: "Young couples and single person households will continue to account for a large proportion of the PRS [private rental sector], but I think over the next few years we will see more families making use of the flexibility and affordable accommodation that the PRS provides.

"With a rising UK population, which is set to grow from 62.3 million today to 65 million in 2016, landlords need to react quickly to a changing tenant demographic as otherwise demand will most certainly exceed supply quite considerably."

Source: FTAdviser 6 Sept 2011

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