The property investment market in the U.K. is relatively simple and relies on four main drivers:
1. Supply and demand for rented accommodation
2. Availability of BTL mortgage products and ease of obtaining them.
3. Sentiment and confidence in property as an investment.
4. The U.K.’s economic indicators, such as inflation/deflation, interest rate rises, unemployment, investment in infrastructure etc.
For supply and demand, the first thing that makes the U.K. unique from many other prime property markets is that we are an island and therefore have a limited supply of land to build new homes.
The U.K. is also a very desirable place to live and attracts many people from abroad to live and work, mainly in our major cities.
Add to that, that the U.K. has not been building enough new homes for the past 30 years, combined with the decrease in investment in social housing, and it is clear to see that the demand side of the equation remains very robust.
These are fundamentals of understanding supply and demand and they remain true and irrefutable, regardless of points 2, 3, and 4.
Recent research has shown that there is increasing pressure on the existing housing stock through higher birth rates and people living longer.
New figures recently revealed that six babies have been born for every new home that has been built in England since 2010, intensifying the housing shortage.
A combination of the birth rate reaching a 41-year high and the struggles faced by the construction industry have caused the ratio of births to new homes to reach its highest level since the end of World War II.
Mortgage insurer Genworth said 6.1 children had been born in England for every property that had been built in the past four years, more than double the ratio of 2.9 seen in the 1950s and 2.4 in the 1970s.
The group warned that future generations of first-time buyers would face unprecedented pressure to purchase a home unless action was taken to ease the situation.
Combine this with the news that …
Thanks to improved diets, advances in medicine and better treatments for infectious diseases , one in three babies born now will live to 100.
According to the Office for National Statistics (ONS), the total number of centenarians is predicted to rise from 14,000 in 2013 to 111,000 in 2037.
The BBC has published an in-depth article about why the U.K. has struggled to build the 240,000 new homes needed each year to keep up with demand.
In 2012-13, the UK hit a post-war low of 135,500 new homes being built per annum, much of which was due to the financial crisis. Last year the figure recovered slightly to 144,000 homes and provision of housing remains very high on the political agenda as we approach the 2015 General Election.
From a residential landlord’s point of view, all this is positive news. It means that there will be a continued demand for rental property both short and long term.
A highly competitive BTL mortgage market is also helping landlords expand their portfolios.
If you are just starting out as a landlord, you can take comfort from this information, and for seasoned landlords, you will already be aware of how quickly your properties let – provided that they are in good condition in good locations of course!
Speaking with your local Northwood office can be an important part of your research to ascertain tenant demand, type of property most in demand etc. and our Guaranteed Rent service proves very popular with novice/accidental landlords who do not want the hassle of dealing with late or missing rental payments.
We believe our Guaranteed Rent service will become even more popular in the light of the recent news from the Government that court fees, including those to obtain possession of a property, are likely to be increased for a second time in under a year.
So high and on-going tenant demand + guaranteed rent = a very attractive and low risk investment no matter which way you look at it!
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