Digital Book version: http://www.landlordzone.co.uk/digital-book/NovDec10/index.html
The future is impossible to predict and more often than not forecasters get it wrong, but there seem to me some obvious factors which will have an impact on renting in the future: (1) structural changes to the jobs market (2) rising tuition fees, and (3) changes to benefits,
Whilst the Bank of England (Nov10 Inflation Report) expect the economic recovery to continue, despite inflation remaining well above target for at least another year, major risks remain with the global economy, the Euro-zone crises especially Ireland, and the main banks’ high loan indebtedness, which is keeping lending low.
The government will do all in its power to maintain interest rates at unprecedentedly low levels, knowing that many mortgage holders are extemely vulnerable to rate rises, and the desperate need to encourage business growth. If inflation were to take off the inevitable rate rises would kill off growth, put many borrowers under intolerable pressure, and lead to a double dip – too painful to contemplate.
Government plans for benefit reform and a rebalancing of the current 55% public / 45% private jobs split could lead to redundancies is some regions. As people start to take-up jobs previously considered below their expectations, slower than forecast population growth due to less immigration, and its high demand for rental accommodation, will likely result.
In the near future graduates will be leaving university with considerable debts, and high fliers who earn most will have to pay back, reducing considerably their disposable income. The nearly 50% of young people who go into universities represent the bulk of first-time buyers. The result is downward pressure on property prices in many regions, but conversely upward pressure on rents.
Whilst London house prices will almost certainly remain strong, those in the regions will probably decline further. But, as we have seen already in this recession, various demographic factors, coupled with some of the economic changes outlined here, mean that rental demand holds-up very well.
The proposed changes to benefits will inevitably put downward pressure on this one sector of the rental market, as something like £2bn is removed. But those operating in the sector will have no choice but to adapt.
With all these uncertainties, investing in rental property can still be profitable for those who selectively pick-up bargains and manage tenancies well.
Don’t miss the Landlord and Buy-to-Let Show NEC Birmingham Wed 17th and Thurs 18th Nov. Two days of free seminars and a hall packed with landlord exhibitors. This show incorporates the Landlord & Letting Suppliers Awards.
Tom Entwistle, October 2010
Content for the Sept / Oct 2010 LandlordZONE Newsletter has been provided by Inventory Specialists No Letting Go
This issue is sponsored by: Cover4LetProperty
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