31 Jan

The changing face of renting v buying

The changing face of renting v buying

At the tail end of 2011, the rental market for the private sector was booming. With rental yields constantly rising, and demand for property to rent in London and other areas sitting far higher than the number which were available, it looked like landlords would continue to see high prices and bidding wars for their property. However, in the early part of 2012, it seems the goalposts are bring moved again, with property for sale looking like it could be about to make a long awaited revival.

In October and November, LSL Property Services was reporting ever-increasing rental yields for landlords, as monthly rent continued to jump higher and higher.

The company said in November that October's figures had signalled an all time high in monthly rental prices, as the average across the UK hit £720 per month. At the same time, this marked the ninth straight month that the cost of rental homes had gone up, as demand continued to drive the prices higher.

It was in December though that this started to change. A slight price drop for rental costs to £717 per month was recorded by LSL in December, with only property for sale in London, Yorkshire and the south bucking the trend of the 0.4 per cent downturn, which was good news for potential tenants, but less so for landlords.

There has also been a change of demand evident in 2012 which could indicate that more confident buyers are ready to turn back to the market in order to acquire their own property.

The Association of Residential Letting Agents (ARLA) reported earlier this month that the number of its clients reporting that there wasmore demand than there were properties in December was 55 per cent, showing a decrease from the 74 per cent in the quarter before.

Tim Hyatt, president of ARLA, said: "The apparent drop in demand for rental properties could be due to the traditionally quiet pre-Christmas period. At the same time, it could indicate a reversal of the surge of new tenants who turned to the PRS when they could not afford to buy."

However, while this may be less than exciting news for many landlords around the country, it could be that sellers and estate agents are about to see an increase in the market at last.

Earlier this week, it was revealed by the Halifax that buying this year is now significantly cheaper than renting, with the added bonus of having a house at the end of the period of borrowing, something that renters will not have.

The Halifax latest report said that buying in the UK is now, on average, 16 per cent cheaper thanrenting, thanks to a decrease in mortgage repayments compared to over the past few years.

It said in its report that the average monthly cost for someone who is renting in the UK still sits quite high at the current time, as they pay £716 per month. On the other hand, the average mortgage holder is now shelling out just £600 of their monthly income, meaning that buying can be over £100 per month cheaper than renting, which could give a welcome boost to the property market.

Martin Ellis, housing economist at Halifax, said: "Theaffordability gains for buyers relative to renters in the last three years have been significant. The average mortgage payment has fallen dramatically over recent years as a result of falling house prices and mortgage rates. At the same time, rents have risen due to strong demand for rented accommodation."

Further incentives could push the property market on this year. With the government having announced its FirstBuy scheme, under which first-time buyers can obtain a house for just 80 per cent of its value on just a five per cent mortgage, with the difference being made up by the government, more people who have never bought before might be tempted to move away from the private rental sector and buy their own place.

It was also reported earlier this month that advice from peoplelooking to buy for the first time rose in the second half of 2011, according to unbiased.co.uk. In August, 41 per cent of all financial advice related to first-time buying, which could indicate that there are many who are just waiting for the chance to climb onto the property ladder in 2012.

So, with a change in the fortunes for buyers this year, there couldvery well be a shift in the market when compared to 2011. A decrease in the demand for rental properties, coupled with a reduction in the amount people are paying to buy a home could mean that the sector regarding sales of property might see a welcome boost.ADNFCR-1222-ID-801280016-ADNFCR

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