To buy or not to buy
Whilst the lettings market surges ahead, don’t run away with the idea that it’s at the expense of property sales.
Beresfords who have both sales and lettings branches across the region say that so called ‘experts’ who have forecast that renting is the future for the UK property market seem to have missed one very important point; every property has to be owned by somebody!
‘The fact is that whilst the number of people in private renting has increased substantially there has still been growth in the owner occupied property sector in recent years according to figures from the Department for Communities and Local Government’ says Beresfords Director, Terry Holmes. ‘However the numbers in social rented property have declined so that there’s now little to choose between the private and social rented sectors’.
The significant increase in buy to let mortgage products and good rental levels has led to many people seeing this type of investment as a viable alternative to poor performing pensions or the volatile equities market.
‘Buy to let is certainly back’ added Terry. ‘Most people are more confident in their knowledge of property than they are other investments and it is something that you have total control over.
‘Whilst a few years ago people were looking for capital growth, today low interest rates and high rents can give a good rental profit but with the additional prospect of capital growth in the medium to long term.’
As an example as to how the sales and lettings sector can co-exist, Beresfords Brentwood sales office recently agreed a sale on a brand new apartment, the buyer completed on the sale 10 days later and within 4 days their lettings team in Brentwood had found a tenant at a rent generating a 6.5% yield.
However, Beresfords have some cautionary advice for long term tenants.
‘According to the Building Societies Association, over 80% of young people aspire to buy their own home and in the medium to long term that is a sensible approach’ continued Terry.
‘Renting when you are younger serves a purpose. It’s flexible and the amount of deposit needed is easier to manage. Today, for many, that is a necessity.
‘But I do fear for those renting in the longer term when they could afford to buy but choose not to because there is a time bomb ticking away.
‘If you don’t leave yourself enough time to get a mortgage over a reasonable term, you need to be asking yourself whether, with pension performance being a worry to many, you could afford to carry on paying out rent from your pension.’
Beresfords go on to say that those that have bought and whose mortgage is geared to be paid on or before retirement will have the same concerns over pensions as others but they will be mortgage free when they retire so their outgoings will be significantly less.
‘It’s about choice’ added Terry. ‘Many homeowners choose to buy something cheaper after retiring and use the funds released to their supplement their pension.’
‘You could buy a smaller property locally or maybe even a similar size property a little further out, and use the equity released to supplement the pension. Freeing up £200,000 from the move would provide £20,000 a year for the next 10 years, tax free’.
For further advice contact your local office, details of which can be found by contacting 01245 397497