For example, a 7% fall in property values – predicted by Investec economists – combined with an increase in rents, could push the average UK yield higher and create potential opportunities for buy-to-let investors. While investment must be considered on a case-by-case basis and independent advice should be sought, it is clear that yields could rise notably over the next 18 months. A long-term lack of housing supply is likely to further support the need for rental accommodation. Unlike during the credit crunch of 2008, mortgage finance is available, however interest rates are higher which may push up costs and reduce returns.Ĭonversely, the Bank Rate means there is a tendency for potential first-time buyers to accumulate in the rented sector and this could increase tenant demand and lead to rent inflation. However, this also means the value of existing investments may decline during the same period. Market forecasts range from -5% to -18% peak-to-trough. The Office for Budget Responsibility sees UK house prices falling 9% by late 2024, though there is considerable uncertainty.
If house prices fall, buy-to-let investors may be able to purchase property at a lower cost as the recession plays out.
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