We have blogged a few times about the supply of new build property remaining low, as developers struggle to catch up with the large build deficit that was left behind after the property value falls of 2008 and the beginning of 2009.
Last year there were only 170,000 new homes built that was a 17% drop even on 2008 figures! This means that there needs to be 240,000 new homes built this year.
This has slowly started to affect the prices of new build property, now that lending criteria has loosened up once again and employment is rising (albeit at a very slow rate.
) There was somewhat of an influx of interest in the new build market at the tail end of last year, as some first time-buyers found themselves finally able to take that first step onto the property ladder.
However there are still those first-time buyers, which are priced out of the market and were relatively happy with rentals as they were still falling because of the accidental landlords, who would rather rent their property than sell it in an unhealthy market.
This however is no longer the case, as people start to see the benefits of selling their rental property once again.
This leaves the average tenant with a lack of choice in the market, but there is certainly no lack of these tenants and this imbalance between tenant demand and property supply is driving rental prices up.
Where does this leave the average buy to let investor? As we have always said we still see the buy to let property market as a good long term investment.
If you can have a tenant paying your mortgage whilst you can take some profit every month you are gaining equity in that property whilst enjoying the surplus.
We still see property prices rising in the long term, even if there is a small correction in prices.
We think investors should take advantage of the current low interest rates and low prices, to purchase a property and benefit by putting profit back into the property gaining equity.
What's our forecast? We feel that this lack of supply is going to continually drive prices up as long as the demand stays constant.
This could therefore price more out of the market, increasing the demand for rental properties from tenants and keeping rental figures rising.
There will need to be a point at which prices for new build property reaches a temporary price equilibrium, which will allow some the benefit of being able to afford their first homes.
Whilst retaining a healthy rental market.
But let's stay away from 100%+ ltv rates for now!