The State Of The UK Buy To Let Market In 2014
With a recovery in the UK property market hitting the headlines, both in terms of sales volumes and prices being achieved, most commentators are expressing a view that the pace will quicken through the year.
During the recent times of austerity, buy-to-let owners have been instrumental in keeping the UK property market ticking over. So, what does the rest of 2014 hold for this important sector?
Prices
With prices already showing increases over the past year, most pundits are predicting the trend will continue for the foreseeable future. The National Institute of Economic and Social Research (NIESR) estimates prices will increase by 5% from their present values whilst major players in the estate agency business such as Hamptons and Savills think the increase will be 6% and 6.5% respectively.
With figures for 2013 declaring that there have already been rises of anything from 3.5-6%, there is no doubt that the UK’s property market is definitely one area of the economy that has turned a corner.
Interest Rates
The other big factor that affects the growth of the property market is how much loans actually cost – something which is tied in closely with the interest rates set by the Bank of England.
During the recent period of historically low interest rates, many homeowners have been able to pay down the capital on their mortgage debts. For some buy-to-let owners, the low rates have simply meant higher yields on existing rental levies.
Good News for Landlords?
The way in which the market is moving affects buy-to-let owners in different ways depending on when they made their purchase. If a property was bought in the boom years, the latest round of increases might still not have brought values back up to the original purchase price. This is because in some cases values have fallen by up to 25% since 2007.
However, with some forecasts suggesting growth of 20-30% over the coming years, investments might reach a point where rental yield is outweighed by potential sales profits.
First Timers
Another factor to add into the mix is that traditional savings strategies have fallen out of favour for many people due to low returns. With interest rates unlikely to see large jumps, there are many first time buy-to-let landlords looking for a piece of the action.
With much debate about the levels of new housing stock entering the market in the UK, the question of whether or not a fresh influx of first time landlords will help create a property bubble is a real concern.
The government has made moves to help first time homeowners get a foot on the property ladder with the Funding for Lending Scheme. However, a recent change to redirect the thrust of the project away from residential lending by the Bank of England is a reaction to the notion that the property market is already in danger of becoming overheated.
Rental Prospects
For those with a buy-to-let portfolio of any size, the future certainly looks bright. Rents have remained stable through the economic crisis and low mortgage costs mean that, for many people, rental yields are the best in a generation.
When capital growth due to increasing prices in added to the mix, it really does seem like a win-win situation awaits the UK buy-to-let market in 2014.
Sally Harding owns a portfolio of buy-to-let properties and likes to share her views on the changing conditions of the market through her regular online contributions to sites including Select property For Students.
