Are Baby Boomers Driving up Letting Prices?
LSL Property Services’ latest buy-to-let index has shown that rents in the private sector have risen consecutively over the last six months – approximately 4.2 per cent nationally. This makes the average rent in the private sector average out to about £750 a month.
The survey though also seems to suggest that whilst rental incomes are rising, the overall capital value of homes is falling, leaving landlords with something of a pricing dilemma on their hands. One solution, as underlined by a HomeLet survey, shows that many homeowners over the age of 55 are choosing to sell their properties and settle in rented accommodation, leading to an increase in competition for rented properties.
Chairman Peter Girling said: “Elderly people in Britain have £3trillion tied up in property and many need this money to fund their living.
“Selling up in later life and renting is the ultimate in equity release. With inflation at five per cent, shares in free fall and low interest rates slashing the value of savings, older people need to access capital tied up in property.”
With such a shift in living attitudes in later life, landlords are altering their contracts to provide such tenants with greater security and longer leases. Estate agency managing director of LSL Property Services, David Newnes, sees no end to the trend and is certain that rental prices will continue to rise in the immediate future.
“Demand from thousands of frustrated buyers each month is underpinning buoyant competition for rental homes, enabling landlords to increase prices.
“The market will continue to heat up. Such strong demand and high rental incomes has forced lenders to take notice, and more are returning to the sector.
“As a result of competition in the buy-to-let market, the range of affordable products is expanding – and lending to investors rose by 21 per cent in the past quarter. Nevertheless, even with the squeeze on landlord finance abating, the new supply will not be enough to meet demand from tenants.”
“As rents climbs, so does the size of the average deposit a new renter must find. Thousands of new buyers each year rely on the bank of mum and dad to help fund a deposit.”
“Falling property prices are holding back total annual returns and will continue to do so over the short term. But the vast majority of prospective investors look at longer-term fundamentals such as tenant demand and yields – and these look increasingly attractive.”
So demand for rented property is high, with first-timers and the elderly seemingly saturating the market. But is this trend good for people looking to get a taste of secure accommodation in a tough economic climate? Or is it only good for private sector landlords who can potentially hold potential tenants hostage? Let us know in the comments section below!
