- 02
- Nov
The strong demand in the rental industry is shown in the latest figures on void periods (the number of weeks that a rented property remains empty each year). Voids have been falling steadily over the past nine months, according to research by Paragon Mortgages. The annual average void period is now between 2.6 and three weeks. Tenant demand will remain high as property prices increase.
Keith Astill, managing director of UCB Home Loans, a subsidiary of Nationwide building society, said:
“People are renting for longer because it’s more difficult to afford to buy, which is in turn providing a boost to the buy-to-let sector.”
Halifax claims that UK property inflation is 10.7%. The figure is higher in Scotland, where house prices are have been increasing 15.9% a year.
Higher prices boost the value of the property, but also squeeze yields, decreasing the percentage of house price covered by the rental income. Yields dipped to 5.5% over the past 16 months, from 5.7% in June 2006, according to Birmingham Midshires.
This despite the fact that rents are on a steady increase, with the average increase of 4.5% in the last year to an average of £651 a month.
Tim Crawford, group economist at Birmingham Midshires, said:
“The fundamentals underpinning the buy-to-let sector remain sound. While house price growth is expected to be more subdued near term, reflecting the impact of higher interest rates, the potential for further increases in rents should encourage long-term investors.
“There also remains the potential for healthy long-term capital appreciation in the buy-to-let sector, particularly given the backdrop of more households being formed each year than there are new properties being built.”
