House price outlook positive amongst landlords.
There is a trend showing in the Young Group’s Young Index, that landlords are starting to have a positive outlook on property prices over the next 12 months, however there is a significant difference between the outlook for London prices and those outside the capital.
Over 75% of landlords believe prices will remain constant or even rise over the next year in London, increasing from just 35% in the last quarter in 2008, however the predicted rise is less than 1%. The view on prices outside of London is divided, with only 51% of landlords believing the same to be true, however this has increased from a gloomy 12% around this time last year, but in contrast the increasing possessiveness the prediction on prices is in fact a small fall of less than 2%
Reluctant landlords - stick or twist?
At the beginning of the 'credit crunch' when house prices fell dramatically the number of people who could not sell, or not afford to sell, was forcing those vendors to rent the property whilst the market improved, which caused an over supply of rental property.
This summer the market seems to have improved, mainly due to a lack of supply of property for sale, which has tempted some reluctant landlords to offload their property meaning a reduction of rental property available.
For remaining 'reluctant landlords' the question is to 'stick or twist'.
Interest rates are generally forecast to remain low for the next 4 years and with improving rents the prospect of the property paying for itself or even making a profit is real. With this prospect the focus switches to the general housing market during and at the end of the 4 year period.
If landlords selling a property are doing so at a potential loss, the idea of holding on the property and making money is attractive. However, in the long term that profit will have to offset any further loss in value of the property if the market falls once again.
The general view at the moment is that house prices have reached the bottom, but predictions for increases in value are minimal so is a reluctant landlord just delaying the inevitable and leaving themselves open to a further loss if the market falls?
A short term view for reluctant landlords is difficult. Sell now and regret the decision if prices rise. Sell now and regret the decision if prices fall. Not sell and have a rental property you may have to partially fund or start to fund if interest rates do rise. Remember it is not just the mortgage you need to worry about, protecting your property with good landlord insurance is a must.
Each option has its own problems attached and the best one will be related to individual circumstances. A longer term view may be best as values in 10 years will probably creep up again due to a continuing shortage of property for sale if Government statistics are to be believed.
The real fact for reluctant landlords is a financial loss on a property is very hard to accept, either through a sale at a lower value or by subsidising the mortgage as the rent does not cover the payments.
Are you a reluctant landlord - what are your views?
Will house prices rise or fall over the next 4 years?
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