Rented homes more valuable than commercial property
Rented homes rocket in value
Monday, 14 Jul 2008 00:16
The value of the housing stock in the UK private rented sector now exceeds that of all privately-owned commercial property, a new report finds.
According to a study carried out by the National Association of Estate Agents (NAEA), the total value of rented property now in the market stands at some £500 billion.
This exceeds the total of value of all privately-owned commercial property, including offices, shops, hotels, factories, warehouses and leisure facilities, finds the NAEA.
The report - The Modern UK Housing Market - Origins and Prospects – also predicts the situation will only improve for property investors, despite the downturn in average property prices, as part of a wide-ranging review of the market.
House prices will "almost certainly" increase faster than commercial real estate over the longer term, argues the NAEA, as housing supply is less responsive to demand than commercial property but consumers demand more housing as living standards rise.
Real house prices rose by 4.2 per cent a year on average between 1981 and 2003, while capital values for commercial property fell by 1.2 per cent by the same measure.
Furthermore, rents are expected to rise in the private-rented sector by between ten and 15 per cent in both 2008 and 2009.
Despite this, he says that the modern private-rented sector is helping to stabilise housing because it accommodates those who, by this stage in the housing cycle, would be over-stretched borrowers with rising negative equity, argues the NAEA.
"It was as a result of the appalling effects on young owner occupiers last time that ARLA took the initiative and launched buy-to-let to re-build and re-finance the private rented sector and to mitigate the dreadful social consequences of housing boom and bust.
"It has proved to be remarkably successful."
However, affordability problems are likely to continue in the UK even if the housing supply increases. The current 56 per cent of 30-34-year-olds who are able to afford a purpose-built flat will fall to 45 per cent by 2016 and to 34 per cent by 2026.
These buyers will still require rented accommodation in some cases.
Chris O'Toole
Your views
David from Eastbourne
So as property falls by 30 to 50 per cent the value will fall £250 Million. I cannot see how buy-to-let has stabilised the sector. Investors have piled into property artificially inflating prices. As they all bail out prices should fall back to sensible levels.