With the latest research indicating that tenants begrudgingly expect to be paying more for their rented accommodation in 2013 than they are now, shrewd property investors can start preparing for improved yields. The findings, taken from Rightmove’s latest Consumer Rental Forecast, reveal that three-fifths of renters expect their monthly payments to rise, which is an increase from 53% at the same point in 2011. The rise is even more marked in London where two thirds of tenants envisage upwards rental pressure and the South East, where 62% are predicting bigger bills.
But rather than simply licking their lips in anticipation, property investors should also be looking at what they can do to help the health of the private rented sector as a whole. In its report, Rightmove expresses concerns that the market in the South East is at risk of over-heating and calls on what it describes as ‘serial landlords’ to help deliver the level of supply required to satisfy the stock-starved rental sector. This is easier said than done of course and the supply shortage afflicts the wider mortgage market and not just the rental arena, although there are signs that landlords are casting their net wider than they may have done previously.
According to research by Paragon Mortgages, landlords are considering a range of different property types in order to expand their portfolios. Terraced houses remain one of the most common investment options, but the popularity of flats/maisonettes, semi-detached and detached houses are all expected to increase in the final quarter of the year. A number of landlords expect to invest in bungalows, multi-unit blocks and Houses in Multiple Occupation before the year is out too, showing that they are exploring all avenues in an attempt to not only increase their collection of properties, but also in an attempt to help alleviate the stress on existing rental stock. The rise in the number of landlords purchasing larger homes is an interesting trend and a break from the stereotypical mould of the two-bedroom flat. It also shows a willingness to cater for increased demand from families who either can’t – or aren’t willing to – get a mortgage.
Of course, supply-side investment is not the sole responsibility of property investors and the UK as a whole continues to suffer as a result of the sluggish starts statistics. Figures from the Communities and Local Government department last month revealed that new housing starts fell for the fifth quarter in a row, meaning you have to go back to the tail end of 2010 for any positive progress. There is no magic switch that can be flicked to arrest this slump but the Government must seriously reconsider its housing policies if it is to not only correct the severe property shortage, but also help reinvigorate a flat-lining construction sector.
Until such time as this issue is addressed, property investors can continue to make hay while the sun shines, but it is ultimately to their benefit – and that of the UK economy as a whole – if they attempt to assist in bringing new properties to market.
Bob Young is Managing Director of CHL Mortgages