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Rental Income Boosted by Shortage of Supply in Residential Buy-to-Let Sector

November 23rd, 2009

Supply of residential property available to rent has plummeted around 20% in the last quarter according to the UK’s Largest Lettings Chain. This news comes as the market corrects itself from drastic changes in:

1)      The availability of finance available for homeowners. With finance more difficult to obtain for want to be homeowners and first time buyers over the last 18 months, many have been left with no option but to look for rented accommodation.

2)      The Lack of new properties being built. With house builders and developers also having experienced drastically increased difficulty in obtaining suitable finance for new projects, the number of new homes produced has fallen sharply. Coupled with the current population boom in the UK, simple economic theory suggests that increased population (demand) and a falling number of new homes (supply) will cause rent (prices) to increase.

A survey carried out by Countrywide Residential Lettings over more than 200 of its’ offices found that the number of enquiries from new tenants increased by 11% in the 3 months leading to October.

Co-managing director of CRL John Hards said: “The rental market is now in the midst of a correction as the excess supply of properties brought on by the downturn in the sales market is disappearing and rental stock is coming under increased demand from the growing number of tenants. The rental market is at crossroads: the economy is fragile and unemployment is still rising. However, we are already seeing the first signs of rent increases due to strong tenant demand, and this looks set to continue.”

So long as finance remains difficult for homeowners and developers we are likely to see continued rent increases across the UK – good news for landlords while interest rates remain so low!

Alpha Property Investment

20 November 2009

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