Credit crunch may give landlords a helping hand

For anyone considering entering the buy-to-let market and renting out a property, there could be a positive future with the potential for making money in store.

With the UK currently experiencing an economic and financial downturn, many people do not have the resources to continue their business practices as usual, including those in the development and construction industries, it has been suggested.

Because of this, there will be fewer homes available in the future, creating higher demand for those who are ready and waiting for their tenancy agreement to be signed.

According to commercial property consultant Drivers Jonas, the lack of new buildings that is likely to occur in 2011 and 2012 is "a positive thing for investors".

This may be welcome news for those with ambitions of signing tenancy agreements and buying rent books.

At the moment the market has taken a nose dive, with the amount of homes being sold falling and this is likely to continue into 2009, Anthony Duggan, head of research at Drivers Jonas, believes.

Official figures from HM Revenue and Customs on Property Transactions in the UK also show that the number of property sales in the UK has fallen since 2007.

In September 2008, 59,000 homes were sold compared to 126,000 in the same time period 12 months previosuly.

However, Mr Duggan stressed that this will not always be the case and landlords will benefit from a "rebalancing of demand" in a few years.

For developers things may be a slightly different story.

They are facing the prospect of empty homes due to the belief that the credit crunch is causing people to tighten their belts and stay where they are rather than consider moving out of house or finding the funds to purchase a mortgage.

Mr Duggan said that "there's reduced developer confidence in the fact that they will be able to lease these buildings once they are complete".

Statistically, construction activity has been down by 20 per cent over the past six months.

Drivers Jones' Crane Survey Central London, which covers the third quarter of the year, found there to be four new starts which is down from 20 at the same time last year.

In the meantime, landlords who have already invested in property with the intention of renting it out to tenants may already be finding that the credit crunch is helping them along.

The Royal Institute of Chartered Surveyors' residential letting survey for 2008 has revealed this to be because more people who would enter the property market as buyers are making the transition into renters.

Falling house prices and tougher lending conditions may mean they are choosing a tenancy agreement over a mortgage because they do not have the finances to fund the loan repayment, the National Landlord's Association claimed this week.

It seems that for some people, entering into the buy-to-let industry at the moment could be one businesses venture which has the potential to be a lucrative and possibly stable investment.

Published on: November 21, 2008

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