Landlords are seeing a rise in rents over the next two years but this means tenants could face affordability squeeze according to Savills reseidential research.
The strength of house price growth over recent years has led to a reduction in first time buyers being able to buy thus boosting the demand for rental properties.
New rental stock entering the market has also grown with the number of BTL mortgages increasing four-fold between 2001 and 2003 according to Savills.
But 2004 saw a significant slowdown in BTL lending, explained partly by weaker house prices and lower yields.
Savills head of residential research Richard Donnell says: “With demand expected to remain strong, we see the pick-up in rental values continuing over the medium term. In some under-supplied areas of the market, rental growth could in fact be quite strong in the short term.”
“The most successful investors strike a careful balance between buying stock that appeals to tenants but which will also prove attractive to those potential buyers who in turn will ultimately be responsible for driving sales values. Getting these two components right will help boost total returns.”