What factors affect the rental market, where does the market stand today and is this good news or bad news for the rental property owners. Some of the major factors are looked at in the article below.
Affordance
The biggest is whether the individual can afford to buy a property. Today a lot of younger people cannot afford to get onto the property ladder, thus in turn this will mean a greater number of people are renting property and a greater number of new build or first time buyer houses or flats are getting bought by property developers. With the current market first time buyers are finding it harder and harder to afford to get onto the property ladder, more people are renting property for longer and property prices continue to rise, all be it slower than has been seen over the last few years.
Interest Rates
Another factor that can contribute to the number of people within the rental market is interest rates. How does this influence the rental market? Higher or lower interest rates have a huge impact on the rental market. Lets take a scenario where interest rates rise significantly, this leads to a big change in the market, firstly, the impact on landlords is high, mortgage values on property will rise (unless on a fixed rate) rental values will increase and depending how high the interest rate hike is can have a huge impact on the market. It can lead to an increase in the number of people who are renting property, landlords selling property due to the increase in the mortgage payments or an increase in rental prices.
Supply and Demand
In any industry supply and demand is a key factor to how the market performs, too much of one and not enough of the other leads to problems. Within the rental market too many houses available for rent and not enough demand will lead to a decrease in rental prices for property, adversely demand for rental property is high, lots of people looking to rent property and not enough rental property on the market will usually result in an upturn for rental values for property.
How does the Market Stand Today
The present market situation today is interesting, over the last 5-10 years property prices have risen dramatically in the UK, the rise has slowed but continues. This has left a number of first time buyers in the position of not being able to afford to get onto the property ladder for a number of different reasons. Some of these are the increase in personal debt, be that student loans, credit cards or personal loans. The massive hike in property value way above the rate of employment pay increases has left the majority of people who are not on the property ladder in the position of being unable to afford firstly the minimum 5% deposit and secondly the monthly mortgage repayments. The dangers open to people here are over stretching themselves with mortgages more than 5 times their current income or 100% mortgages, even a small jump in interest rates will affect these people. Supply of rental property to demand is currently good, there are tenants to fill property, as usual the better property on the market will get filled and some areas are in higher demand than others.
Summary
This in mind is good news for the rental market today there are a huge number of people who are staying in rented accommodation for years more than before due to the viscous cycle of buying a property. If the landlords can keep their property and resist the temptation of selling for the quick cash in on the increase values of their property, there is no downturn in property prices, then they can expect tenants to stay in property longer than ever before and more and more people will be renting property for longer than ever. The big question is will times change and if so when.
Rentright Property Rental Portal will be providing statistical analysis of rental prices and any increase and decreases in rental values using the RRPI (Residential Rental Price Index) this will give an oversight if there are any significant changes in the market.