Finance News

Predictions and Forecasts for the Rental Market

Em Morley - August 31, 2012

Recent reports have provided extremely welcome reading for buy-to-let investors. Indications suggest that due to increasing rents, recovering property prices and low interest rates, investors can expect profitable returns on their investment during the next 13 years.

Just what does the future hold for the buy-to-let sector?

Rent hike

Statistics from the Royal Institute of Chartered Surveyors (RICS) indicate that rental prices have risen by 4.3% over the previous 12 months.[1] RICS believe that this is due to the fact that mortgages for potential homeowners are still difficult to achieve.

In addition, RICS predict a 3.9% increase in rent prices over the next year, believing that demand for rental accommodation will climb, with supply remaining even.[1]

Indications also suggest a regional differentiation in rent prices. For example, rental prices rose by almost 7% within the North West of England during the last 12 months.

Predictions and Forecasts for the Rental Market

Predictions and Forecasts for the Rental Market

 

Rental price hikes are worrying a number of industry figures. Peter Bolton King, Global Residential Director at RICS stated: “While tenant interest is still riding high, what remains to be seen is whether many are willing to meet the increasing rents being demanded by landlords.”[1]

Bolton King went on to say: “It is clear we have seen rents grow steadily right across the UK for some time. This is partly down to the problem of the scarcity of mortgage finance and the large deposits required by lenders.”[1]

Future estimates

Industry forecasts for the future of rental and property markets predict a 2% increase in house prices until the year 2025. Forecasters suggest that there will be a marked shortage in supply of privately rented accommodation, when demand returns to its pre-recession level at the back end of this decade.[1]

It does however seem to be the premium time for landlords to extend their existing portfolios. With house prices rising, landlords able to extend in the present climate could reap the rewards in future years.

However, John Hawskworth, Chief Economist with PricewaterhouseCoopers, urges caution: “Housing is a potentially risky asset as recent experience makes all too clear.”[1]

[1] http://www.landlordexpert.co.uk/2012/08/31/the-rental-market-predictions-and-forecasts/