Is the rental market still viable ?

PAUL Oughton who heads the lettings division of Moore Allen & Innocent, believes that retaining or investing in a residential property to let it out can still offer an excellent investment option despite the amount of negative coverage in the media of late.

“It is true to say that it is not for everyone” says Paul, “and before entering the market you must take expert advice from an appropriate adviser, but so long as you are aware of the risks and plan accordingly then, with, its potential of rental income and capital appreciation, buy-to-let (BLT) (BTL) can still present a very good long term investment proposal.”

When appraising an investment, whether a new or existing property, Landlords should always look at the potential property yield (the annual rental income as a percentage of the purchase price). Currently, and depending on the specifics of the property, a good yield might be in the region of four percent to which you must also build in the ongoing running costs such as insurance, service charges and agent’s fees.

Landlords with borrowing should also consider what impact an increase in mortgage rates may have on their return. Although recent indications from the Bank of England are that rates may not rise as quickly as previously thought, they will certainly rise at some point.

You should budget for void periods - when the property is empty between tenancies, as well as having a contingency fund available for emergencies or potential decoration costs.

Good maintenance and keeping the facilities and décor up-to-date will make your property a good place to live. This will mean better tenants paying a higher rent and less void periods between tenants.

Unless you have the time and inclination to deal with the problems that do arise with any property, employing a good agent to handle the letting and manage the property will be money well spent. Rather than thinking that cheapest is best, select an agent that knows the area, has experience of the market, offers clear and simple terms and critically, one that offers client money protection as standard.

So, in light of all this why do we believe that rental property will remain a good option for certain investors? Simply because, The private rented sector is, and will remain, an integral part of the UK housing market. This is partly because for many, it is virtually impossible to buy, despite the incentives that the Government are offering such as ‘Help to buy’. But also because there are a significant number who choose to rent as a lifestyle choice.

Not only that, the population of the UK is predicted to rise by a further 10 million by 2037 and single person households are forecast to increase by 61,000 over the next five years.

Therefore demand for good quality property to rent is not going away any time soon, whereas the supply is likely to slow down considerably due to the Government’s recent measures because this will deter many small and medium sized BTL investors from entering the market or increasing their portfolios.

Cirencester and the surrounding towns and villages remain much sought after areas to live in. Amongst all the other great advantages such as the scenery and low unemployment, the schools are outstanding and the transport links are excellent. This leads to demand far in excess of supply, which in turn leads to strong growth in capital values as well as rents.

With the shortage in supply and no let-up in demand, it is not difficult to see that rents may rise at a higher rate than in recent years and this increase in yield together with a steady rise in capital growth are set to counter any negative impact of the changes seen so far.

Moore Allen & Innocent have been successfully letting and managing property for years and their reputation as the agent of choice speaks for itself. The fee structure is clear, simple and competitive whilst the service is professional, comprehensive and tailored to the needs of the individual Landlord.

For further information and a no obligation discussion on letting or managing your property – as well as a helpful and comprehensive Guide for Landlords, contact Paul Oughton or Elizabeth Billett at Moore Allen & Innocent in Cirencester on 01285 648118 or Lorraine Kyte and Nancy Haughton in Lechlade on 01367 253138 or email: lettings@mooreallen.co.uk