Gazumping causes further increase in private rents

Gazumping is something that has been rife in the property purchase market for many years. However, there has been rising evidence that this process has also been spreading through the private rental sector over recent months, as potential tenants become more and more unscrupulous in a bid to get their hands on the rented property of their choice.

Many landlords will be celebrating the recent news that private rents have increased once again in May but demand for rental properties remains very strong. There are now more and more people after each rented property that comes onto the market, with this unprecedented demand for rental homes resulting in processed such as sealed bids and gazumping coming into force.

Many officials have said that the increase in gazumping within the private rental market has been one of the driving forced behind the rental increases that have been seen in the sector over recent months. Whilst rents have not increased hugely between April and May, with the average increase being £4 per month taking the average monthly rent to £696.

Compared to May of last year monthly rents were around 4.4 percent higher. However, there were significant regional variations according to reports, with areas such as London seeing an increase of around 7.8 percent on rents in the last year but places such as the East of England seeing rents fall by around 1.2 percent in the same time period. The general increase in rents for yet another month will be welcomed by landlords, who will be able to see further increases in their investment returns coupled with continued increasing demand for their properties.

An official from the property group LSL said: “The rocketing cost of living, combined with ongoing difficulty first-time buyers are experiencing in obtaining a mortgage, is increasing the number reliant on rental accommodation. With the fierce competition for homes, rental gazumping is becoming more commonplace and properties are being let beyond asking price, putting further upwards pressure on the market. For tenants, unable to buy, renting is becoming less affordable as demand booms. Rents are increasing at twice the rate of wages.”

Tags: first time buyers, Many officials, recent, london, same time period, regional variations, rental gazumping, rental

Future demand for buy to let mortgages could fall

According to a recent report the demand for buy to let mortgages could fall in the future, as a slow down in the rise of property values hits, lumbering landlords with higher mortgage repayments but lower house value inflation and rental income.

However, reports have also indicated that at present landlords are doing very well, and in the past year enjoyed returns of around 13%. Reports indicate that landlords saw the property vales rise on average by around 7.3% and saw rental returns of around 5.5% of the property value.

The figures come from a report issued by Birmingham Midshires. The report indicated that although the 13% property value rise seen was up from the previous twelve months of 11.9% rental payments dropped from 5.7% in the previous twelve months to 5.5% last year. Birmingham Midshires warned that the interest rate rises had led to mortgage repayments being higher than rental payments, and that this could have a dampening effect on the popularity and take up of buy to let mortgages.

One economist from the building society stated: ‘While house price growth in the sector is expected to be more subdued near-term, reflecting the impact of higher interest rates, the potential for further increases in rents should encourage long-term investors. There also remains the potential for healthy long-term capital appreciation in the buy-to-let sector, particularly given the backdrop of more households being formed each year than there are new properties being built.’

Along with homeowners buy to let landlords are likely to be hit hard by the interest rate rises that have been applied by the Bank of England over the past year, as it means higher repayments on the mortgage without higher rental income.

Tom Smith
1st August 2007

Tags: landlords, interest, rise, value, payments, buy, property, let, rent