Buy To Let - Rent Increasing

TDP 'unlikely to dent buy-to-let'

The implementation of the proposed Tenancy Deposit Protection (TDP) initiative this year is unlikely to dent the strong performance of the buy-to-let sector, according to estate agents.

Coming into force in April, the scheme will require landlords to either opt into an insurance scheme or a custodial scheme, designed to ensure tenants have their deposits returned to them in a fair and regulated manner. If there is a dispute about the amount of deposit to be paid back to the tenant, the scheme will hold the amount for safekeeping until it is resolved by the dispute resolution service or courts.

The National Association of Estate Agents (NAEA) said that the scheme was unlikely to have as much of an effect on residential lettings as the recently-implemented Houses in Multiple Occupation (HMO) legislation, although landlords could experience slightly reduced returns as a consequence of TDP.

The organisation said that the sector was "thriving" throughout 2006 thanks to affordability, an increase in immigration and strong interest in bricks and mortar as an investment, despite the implementation of HMO rules.

Lettings expert at the NAEA Jan Bartlett said: "I am confident that there is still significant return to be gained from buy-to-let property and I hope that the initiation of the Tenancy Deposit Protection initiative will not deter investors."

Landlord Mortgages comments ‘We have found that landlords are generally unprepared for the changes. I can understand the lack of preparation given that the majority of landlords use Letting Agents. I would hope Letting Agents are well prepared like our sister company LettingAgent.com, as it is them who deal with the ‘client money’ held on deposit not their landlord clients. One of our professional Buy To Let landlords thinks the Government will make a u-turn i.e. following in the footsteps of HIPS and SIPS. Another landlord is going to ‘package it’ as a tenant benefit with a sales pitch stating - you the tenant can now protect the deposit by paying a sum of money.’

Tenant demand sees highest rise for nine years

Tenant demand for rental properties rose at its fastest pace for nine years in the final quarter of 2006, according to a new report from the Royal Institution of Chartered Surveyors (Rics).

The quarterly study revealed that 30 per cent more chartered surveyors reported a rise than a fall in tenant lettings, up from 21 per cent in October 2006 and the highest recorded rise in tenant demand since July 1998's 41 per cent.

Demand for both flats and houses grew, with houses seeing the biggest rise, and 34 per cent more chartered surveyors reporting a rise than a fall in demand for houses, compared to 22 per cent in October.

Rising household incomes were leading to increased rental demand for larger properties, Rics claimed, and affordability conditions continued to prevent would-be buyers from purchasing a home.

Rics spokesman Jeremy Leaf said that the buy-to-let market remained "healthy" and interest rate rises were yet to bite.

He said: "With house prices still rising, the rental market will remain a 'property purgatory' for many would-be-buyers unless accessibility and affordability conditions improve significantly.

"However, tenant demand will continue to rise as long as economic conditions remain strong."

Landlord Mortgages comments ‘in our opinion it is inevitable that interest rate rises will dampen demand in the property market. The number of new landlords entering the current property market will diminish; they will find it very hard to make the figures stack without having a sizeable deposit. In contrast, the experienced landlord has plenty of equity so is likely to play with the figures and flourish in the anticipated future market conditions. We are also anticipating rents to catch up as fewer properties come available for rent. A client with over 150 properties in East London has already reported rental increases.’

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