LETTING & ESTATE AGENT

Big gains or big falls?

Big gains or big falls?
I was speaking to a landlord of mine last week who has agreed to buy a house in Treffry Road with the intention of renting it out long term. He asked my advice before going ahead and I was happy to recommend the house, as I used to rent it out a few years ago before the owner moved back in. The new landlord was delighted that I knew the house so well and the yield he would achieve would be well over 5% - the really interesting part was what the original owners yield would be.
The original owner bought the property in 2007 for just over £185,000 with a realistic achievable rent of £925pcm, giving him a yield of 6%. He sold to the new buyer for £210,000 so a capital gain of £25k. It was a new build house and for the period I rented the house out (2008-2013) very little was spent on mainteance. 
Since the onset of the recession, young adults coming out of university have not had the financial means to save up for deposits, and their income levels are still too low to guarantee mortgage repayments, which are set to rise with interest rates later this year.
So most people aged 20-45 (57%) are forgoing making savings for a house, and are instead looking at renting. This is also reflected in the fact that homeownership is at its lowest level in 29 years, especially among young people, and this number may continue to decrease in the coming years.
In figures released by Halifax it was discovered that non-homeowners felt they would never buy a home, with at least 71% of survey respondents claiming this (in the North West), and up to 82% (London) at most. Here in Cornwall we are seeing a big gap between average wages (currently £13,900pa) and the average price of a house (currently £229,849). To put that in real terms an average first time buyer mortgage would need a deposit of around 10% - so roughly £23,000. 
If the average couple living in a rented property in Cornwall saved 10% of their yearly income after tax, this would be just over £2150, meaning it will take over 10 years to save for that deposit!
This isn't necessarily a bad thing . but a positive reflection of the trend of wanting to rent. It is seen as a more secure option that removes many financial risks (namely mortgage repayments), but still allows 'serious' renters to live in a house they can essentially call their own. There is no reason to see this trend changing any time soon. Furthermore, the property bubble originating from London is starting to spread around the country, and is affecting other regions around the nation.
House prices will rise alongside demand while supply lowers, and people are now faced with two options . save up while living with their parents, or rent. The chance
of owning a home is decreasing steadily, and this bodes well for the rental market. More and more people will be looking to rent, which means that landlords will face no shortage of tenants to choose between when it comes to letting their property.

Martin & Co Truro have more than 40 years of experience lettings houses between the staff and if you would like any information on how we find you the best tenants for your property, call us on 01872 22 53 54.