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Rental market to remain buoyant

Rental market to remain buoyant

Category: Mortgages

Updated: 22/11/2010
First Published: 22/11/2010

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

A shortage in the supply of properties to let is set to see the UK rental market remain buoyant over the coming year.

According to the latest Rightmove consumer confidence survey, 40% of tenants believe rents will be higher in 12 months' time.

While this may represent bad news for those having to rent, landlords will be celebrating as the yield on their property investments improves further.

A slump in the volumes of property to let combined with rises in the number of people having to rent is being credited with driving rents ever higher.

The property website said that the stock of available rental properties had dropped by almost a quarter compared with a year earlier.

However, the number of so-called 'institutionalised renters' remains high, with almost one in three resigned to staying in rented accommodation for three years or more.

The survey also found that the amount of 'trapped renters' who would like to buy a home but can't afford to remains high at 55%.

Yet despite the rising attractiveness of the buy-to-let market to potential investors at present, problems in securing mortgage funding are still preventing new landlords from entering the rental fray.

"That the combination of longer-term tenancy and improving rental returns provides a more stable and low risk investment should, in theory, increase the number of properties in the rented sector," said Miles Shipside, director of Rightmove.

"However, the influx will remain restricted to those investor landlords who have high levels of access to cash to lessen their reliance on hard to obtain mortgage funding."

With potential rental yields now being pushed beyond 6%, Mr Shipside suggested that the buy-to-let market had become even more attractive to investors compared with other asset classes.

"Higher returns are great for existing landlords and those with more cash to invest in more buy to lets," he added.

"This group will keep the fun of better returns to themselves, however, until lenders become more flush with their cash and less suspicious of their former darlings who they were so desperate to date until only a couple of years ago."

Although the buy-to-let mortgage market is not as large as it once was, the number of buy-to-let mortgage deals has been expanding of late.

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