The gross yield (rent as a proportion of the value of the property) varies from about 4 per cent to 9 per cent. There are more migrant workers, more people on temporary working contracts, more people being made redundant, more getting divorced and more students. I couldn't find anyone selling up their whole portfolio, though this could be due to a desire to avoid big capital gains tax bills.Most landlords expected changes in the rules on Self Invested Personal Pension Plans (SIPPS) to increase demand for UK property. Whilst some were looking to overseas property for better growth, others were still optimistic about the UK.
I talked to a few landlords at the recent London Homebuyer Show. Generally, the mood was positive, though all agreed it's harder to make money now. However, poorer novice landlords with no other source of money to draw on don't have the option of waiting for the long term. With the typical buy-to-let mortgage rate at about 6.25 per cent, you don't need to be an economist to see that you could earn more by just sticking the money in a high interest account.Many landlords are hoping that increases in house prices in the long term will make up for any current loss of income. These factors have all helped drive demand for rented accommodation and seem set to continue into the future.However, as house prices have risen faster than rents, it has become harder for new landlords to make enough on rent to cover the interest needed to pay their mortgage loans. Unfortunately, supply has struggled to keep up.Kate Barker in a report for the Government said the UK needs at least an extra 39,000 houses per year to close the gap between the number of new houses being built and the number of households being formed.
The Government has promised more house building but many are sceptical they can deliver.The population is also getting more mobile. The UK's population is getting ever bigger leading to more demand for housing overall. The trouble is that some surveys forecast a meltdown for property, while others are saying the outlook is good. So, what's the true story? Since 1973 the annualised average return on property including rents has been about 16 per cent with the biggest returns in recent years. But is the housing market just a speculative bubble? What's driving all this?Falling interest rates in recent years and rising earnings have helped, but a big factor is the change in demographics. You cold also try walking the streets, looking for private sellers' boards. Keeping in regular contact with estate agents will also increase a buyer's chances of seeing properties as soon as they come on to the market.Agents might even be persuaded to call round potential sellers on behalf of a serious buyer.An estate agent might have valued a property, but the owner has yet to give a formal instruction.
