Assetz® News - Rental value soars

Rental value soars

14th July 2008 |

Those doubting the value of buy-to-let property may have been in for a surprise when new research came out today showing that, despite some recent falls in the value of residential property, in total it is now worth more than commercial property.

Carried out by Professor Michael Ball from the University of Reading on behalf of the Association of Residential Lettings Agents (Arla), Part I of the report, entitled: The Modern UK Housing Market - Origins and Prospects, found that the combined worth of all the privately rented properties in the UK is now £500 billion, more than the total value of all the commercial offices, shops, factories, warehouses, hotels and leisure facilities in the country.

So, it seems, those who have invested in property for such purposes have, on the whole, done very well. But the report adds that the prospects for the future are good too, another finding that could thumb the metaphorical nose at the doom-mongers. Professor Ball predicted that in both this year and 2009 rents will rise by between ten and 15 per cent.

Arla noted that the report said this trend was actually part of a stabilising effect the buy-to-let industry is having on the housing market. While a popular accusation in recent years has been that buy-to-let has snapped up homes for rent that might otherwise be bought, thus frustrating the ambitions of first-time buyers, this report suggests that in fact the situation now is one where the availability of so much more rental accommodation means no repeat of the situation where a large number of young buyers suffered from the negative equity of the early 1990s.

Commenting on this, Arla head of operations Ian Potter said: "It was as a result of the appalling effects on young owner occupiers last time that Arla took the initiative and launched buy to let to re-build and re-finance the private rented sector and to mitigate the dreadful social consequences of housing boom and bust. It has proved to be remarkably successful."

There is certainly evidence about that people are choosing to rent rather than buy. One example last week came in a market that has been much maligned in recent months, that of apartments in provincial cities. The Liverpool Echo reported that a major surge of rental deals has occurred in the city's fashionable new apartment blocks, with an example of how much money can be saved compared to buying being the £550 per month it costs to rent a one-bedroom apartment in the Alexandra Tower at the waterfront, half the monthly cost of a mortgage on the property.

Accounts manager with City Residential's office in Liverpool told the paper: "Last month alone we did 50 move-ins. I think people are choosing to rent because it's so hard to get on the property ladder at the moment. It means people are being forced to rent so they can move out of home."

So, it appears, not only is buy-to-let proving valuable, but its ability to make the most of circumstances, even those that are making life hard for so much of the property industry, is not just there for all to see, but providing an important service to those keen to get a place of their own but maybe not so keen to buy.