Despite the turbulence of the economy at large, 2008 was generally a favourable year for the lettings market claims the Association of Residential Lettings Agents (ARLA). Its members found no shortage of new instructions from vendors who were having difficulty selling at the prices they had become accustomed to expect. But towards the latter part of the year, the market became more unpredictable with rental returns experiencing a variety of regional fluctuations.
With this in mind, ARLA is predicting that 2009 will be both a challenge and an opportunity for the residential lettings market. The Association expects rental demand to hold up while consumers are still unable to finance deals but stock levels are, ultimately, likely to rise therefore forcing rents down.
However, ARLA is predicting a return to a strong UK property market by the end of year. It claims property remains a solid long-term investment but warns of patchy returns around the country, particularly in the first half of the year.
2009 will be a tough year for investor residential landlords who are feeling the repercussions of lender illiquidity and tougher mortgaging policies. ARLA is predicting that there will be an increase in landlords defaulting on their monthly mortgage payments over the coming months, and an increased rate of repossessions as a result.
As the Mortgage Support Scheme recently announced by the Government will not cover buy to let landlords, tenants will also be at greater risk of homelessness into 2009.
However, ARLA expects to see a revival of the buy to let market by the end of next year. Ian Potter, Operations Manager of ARLA, said: “With house prices continuing to fall, we’re expecting to see a good deal of investor landlords enticed back into buying up properties, as they recognise that bricks and mortar are still the most solid long-term investment.
“This adage is particularly apt when considering the prospect of further falls in interest rates that will impinge on savings accounts.
“I’m also hopeful that many of the ‘reluctant landlords’ we saw entering the market as a result of falling house prices will be encouraged by their rental returns and see the benefits of buying to let. All the market needs is a bit of confidence and then we will see it become freed up and stock moving again.”
The findings of the Rugg Review confirmed the real and urgent need for lettings agents to be licensed, a point of contention that ARLA has lobbied on for many years.
Potter added: “At the moment anyone can set up as a lettings agent with no experience in the market and, more importantly, no regulation. This represents a huge risk to consumers who now, more than ever, need to be confident that their point of contact is a professional not a cowboy.
“Licensing for the property industry has been a long time coming but I predict that 2009 will be the year that Ministers, the media and the general public will start taking notice and demanding change.”
Potter believes that rental returns will continue to be patchy in 2009, with large disparities even within towns and that there are properties that have come down in price in greater proportion to others, meaning that there will be a greater bounce back in price when the market does finally improve.
For those wanting to enter the lettings market in the New Year, he has the following advice: “Try to identify areas where a property can be let out more easily, those areas with high employment and a greater proportion of people looking for short term rents. The large student populations of university towns are a good example.”
Finally, ARLA feels that with the right approach there is certainly money to be made from renting properties. However, Potter warns that “if it was easy to do, everyone would be looking to do it” so any prospective landlords should find a reputable agent who will be able to give them sound advice to help make their investment a success.
