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Gloom need not mean doom for property gurus

25th July 2008 | back to article listings BACK    print this article PRINT

Simply to turn on the news in recent times would be a good idea for those wanting to be bombarded by apocalyptic comments on the economy. It seems that not a day goes by without the naysayers banging on about a possible recession, the credit crunch and the disappearance of the good old times. One day it might be that house prices have fallen, the next it will be images of television reporters looking moody and serious among the bread and milk in the supermarket aisles. And this is usually a depressing picture, the tone is over-egged to make it seem like the walls are actually caving in.

Indeed, British Bankers' Association figures brought out this week confirmed that the mood is not great among home buyers. In June, it remarked that mortgage approvals dipped by 23 per cent when placed in comparison with the month before. Chief economist at the Royal Institution of Chartered Surveyors Simon Rubinsohn warned that this is fairly bleak. "The continuing lack of availability of mortgage finance is proving a major drag on the level of property transactions and is increasingly being felt in the real economy," he noted.

But a new report released this week has suggested that prevailing credit crunch may actually be welcome news for buy-to-let property investors. Your Move's publication contends that these individuals are benefiting from the inability of buyers unable to get on the property ladder due to tightened lending conditions. In fact, if it is to be believed then rental demand is actually enjoying a proverbial purple patch. Between May and June, it observed, the amount of leases commencing grew by three per cent. And if this is not a good enough incentive for buy-to-letters, it added that year-on-year the popularity of rented dwelling swelled by 38 per cent.

So what's behind the shift? Your Move's managing director David Newnes commented that potential first-time buyers are simply opting to move away from the ownership market while times are tough for them. "There has been a stellar rise in the number of people looking to rent since the credit crunch began to kick in," he highlighted. Mr Newnes then suggested: "The criteria banks and building societies use for deciding how much you can borrow have got a lot tougher."

The official was fairly keen to push the case for buy-to-let landlords, urging them to take advantage of the current climate and climb onboard. "With rising tenant demand comes rising rents - buy-to-let yields will consequently improve," he stated. So it would appear that despite the constant noise coming from the doom-mongers littered among the cheese stands and people's living rooms that there is some hope yet. Maybe it's OK to go outside?

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