Rental market for properties confusing
Fewer and fewer people can afford to buy properties, particularly the young and first time buyers s o this must mean a corresponding boom in rentals and landlords are sitting pretty right ?
Well you’d have thought so, but there are contra indications from looking at the underlying economic analysis.
On the one hand, taking a simple supply and demand view, there is an increased demand for rentals and a limited supply. On the other hand, having a good tenant is very valuable for a landlord particularly as getting a non-paying tenant out takes time.
Putting rentals up may not be as easy as appears – yes there is the demand but the squeeze on salaries and cost of living means that there are limits to what is possible. It seems that the economic gloom permeates all sectors, even those which should be otherwise booming.
In a report entitled “Investing in the Private Rented Sector” 200 landlords were asked for in-depth financial information to ascertain the real profits, income and capital, which can be made from investing in property and renting it out.
The findings of the report make for interesting and somewhat surprising viewing. Some of the headline findings are :-
- current rent levels may well not cover landlords expenses when factoring in refurbishment and borrowing costs, letting agents or legal charges, defaults and periods of unoccupancy, energy and safety certificates and other costs.
- Tax on rental properties averages about £1,000.00 a year.
- Capital depreciation since the peak of the market often means that taking everything into account, many landlords are current sitting on an overall annual loss.
What do you think about the above ? If you are a landlord, what’s your experience of the market and your profit ?
