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11.01.2010 | Rental market outlook continues to be positive

Positive year forecast for rentals

The housing market continues to show signs of improvement but the outlook is mixed, with the rental sector expected to be the most buoyant.

House sales were 11% up in September (HM Land Registry) and the number of mortgages approved increased for the twelfth successive month in November (Bank of England). Nonetheless, mortgage approvals remain 53% below their late 2006 peak.

Increased demand and a shortage of supply have helped to stabilise house prices, which were 1.1% up in December (Halifax). Prices have risen by 9.4% since reaching a low of -17.7% in April 2009. However, as more owners are tempted to sell, increasing supply, pressure on prices could reverse, at least until there are signs of an economic recovery.

Demand is being stimulated by attractive mortgage rates (< 3%) although lower borrowing to value ratios are limiting the scope of the demand. The days of the 100%+ mortgage have long gone. 75% is now the norm, making such deals unaffordable to would be first time buyers with lower incomes and little savings. As a result, the rise in demand for houses has been skewed towards the top end of the housing market and to rentals.

Confidence and affordability are the keys to a sustained housing market recovery. This can only happen within a positive, growing economy.

The outlook for the rental sector continues to be extremely positive. The trend away from home ownership towards rental looks set to continue.

The Council of Mortgage Lenders (CML) report buy-to-let lending rising for the first time in two years (+10% Qtr 3 v Qtr 2), Moneyfacts report a 33% increase in buy-to-let mortgage products becoming available in the last quarter and major mortgage lenders such as The Mortgage Works (part of the Nationwide) expect the buy-to-let sector to be the most buoyant within the mortgage market this year.

70% mortgages are available in the marketplace at a typical interest rate of 4.25%. Rental yields should more than cover this cost.

The Association of Residential Letting Agents (ARLA) reported a fall in ‘reluctant landlords’ (those renting because they cannot sell) for a third consecutive quarter. The decrease in the supply of properties (-10% in November, -3.5% in October according to Find a Property) has seen rents (and yields) stating to increase and the average time nationally to find a tenant reducing to 55 days from 71 days a year ago (‘Your Mortgage’ 26/11).

Government launches Boiler Scrappage Scheme

A national scheme to upgrade household heating systems to cut carbon, save money on fuel bills and sustain work for the heating industry has been launched by the Government.

The Government has launched the Boiler Scappage Scheme, which allows 125,000 households with working "G-rated" boilers £400 off the price of a new, modern "A-rated" boiler. Qualifying households need to apply for a voucher from the Energy Saving Trust.

Some manufacturers are complementing the scheme by offering their own additional discounts. If you qualify, you are advised to shop around to find the best deal before applying to the Scheme.

The scheme is designed to help sustain work for the 130,000 installers and over 25 UK-based boiler manufacturers, cut a participating household's energy bill by some £200 a year and save up to 140,000tCO2 per year - equivalent to taking 45,000 cars off the road.

You can go online to check whether your boiler is G rated (www.energysavingtrust.org.uk.)

or you can call the nationwide advice centre on 0800 512 012.