High Tenant Demand Returns To Buy To Let Market

uk rent prices rise

We talk a lot on here about supply and demand effecting the sales sector, however current market conditions are also effecting the landlord rental sector too. Recent research from the association of residential landlords shows that less rental property is now available.

Demand Will Rise

However, tenant demand is on the rise. In the South East, where the sector is worst hit, there has been an increase in demand by 56%. This is great news for existing landlords of course.This situation is partly down to two main factors. Firstly landlords are finding it increasingly difficult to get finance and hence can’t buy any properties to rent out. Secondly, many cannot remortgage to raise finance either.

A Rental Shortage

So we are now finding ourselves in the odd situation of there becoming a rental housing shortage, very little affordable homes to buy AND very low construction levels for new builds. Add to this the fact that students, often the life blood of a residential landlord, are growing in number as more are choosing secondary education rather than face the labour market.

I’m left thinking… If more folks loose their jobs or split up due to financial pressures and are seeking a place to rent, then the competition could well get very fierce.

Ultimately this means rents will go up of course as many landlords will choose to stick with their current investments rather than risk the huge costs associated with financing new ones. Add this to the potential long term interest rate rises which are surely on the cards and that innevitably will wipe out profits in the future, and we have a pretty severe housing crisis about to unfold.

LHA- Problems In Waiting

One last thing which is coming to light is the potential problem that many LHA tenants will also fall behind with rents due to the caps which will be enforced on rent from 2011 due to the new budget and coalition plans. I suspect this also means that the demand for rooms or bedsits will go up in the medium to long term as many of the new tenants will not be able to afford to move into a one or two bed property. Where will all those rooms come from I wonder? This is also likely to make it even more difficult for housing benefit tenants to get a place to live at an affordable level.

Landlords Can Take Advantage

if you have residential BTL investments and are worried about their long term profit potential, now could be the time to look again at your local market and assess it for any of the changes above that you can take advantage of. You can check demand easily enough at Spare Room website too.

Managing a room by room let (HMO) is really no more difficult than a regular rental, especially when demand is so high. So you should be using this to your advantage to get greater cash flow from your investments whilst the market is with you. Also, this could give you an escape route from your mortgage if you put the extra to one side, or use it to start paying down the mortgage, hence making your chances of further finance more likely in the future.

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