Buy to Let - House Prices and Rents Trends

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Being a landlord has long proved profitable. It has tended to be dominated by the wealthy or by large companies owning many properties, but there has always been also the smaller landlord renting out just one or two properties.

Over the long term, rents and house values have tended to increase in line with wages - but with house prices also showing some short-term sensitivity to interest rates because much house buying depends on mortgages and their interest rate costs. So house values and rents have long tended to rise, with some fallbacks, about as below ;

But wages and interest rates are not the only things that can affect house values and rent levels. There can be times when the number of new households wanting housing grows faster or slower than the number of new houses being built. And while population tends to grow, the land available for housing may not grow as much. So house prices in the UK in recent years have increased much faster than wages, and nobody knows how much longer that may continue.

Renting out property has always been at least a reasonably good longer-term investment because increasing property value is generally not taxed. And if house prices are rising much faster than wages, then owning property can be extra profitable. Of course house prices do sometimes fall for a time, so as a short-term investment property can certainly involve some real risk. If interest rates rise sharply and property values fall at the same time then this can create problems for some property investors that may take some years to come out of. This is why a property investment needs to be for at least 10 to 15 years to give assured profit. In 2009 interest rates in the UK bottomed and now property prices have started rising from their bottom - expect 2011 to see rising interest rates and property prices rising more. So 2010 is a time to favour Fixed Rate mortgages over Variable or Tracker mortgages.

PS. If you are looking for somewhere for yourself, then you may prefer to rent a city centre apartment.

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