Rents drive housing investment more than capital gain

26/07/2009

David Alexander, owner of letting agent DJ Alexander, said investors are entering the residential property market because of the rental income available. While some bank
Accounts are paying as little as 0.5 per cent a year, landlords are getting returns of4 per cent, after expenses, in popular rental areas of Edinburgh and Glasgow.

With house prices remaining flat or falling, capital growth, which traditionally motivated clients to invest in residential property, is taking a back seat. Alexander said investors accept that a recovery in capital values, and further growth, will be a medium to long-term process. He added that tenanted properties in locations are attracting the attention of investors who would normally put their substantial cash savings in bank accounts.

Alexander said: “It is the current return from rental income that is attracting clients, rather than the prospect of capital growth, which, during the 27 years my firm has been in business, has been the raison d‘être for residential property investment.”

He said new investors are opting for residential property with an “open mind and a clear head”. They are prepared for the possibility that, three months from now, the market value of their properties may actually be less than they paid.

“They are confident that, unless the world turns completely upside down, values will recover in line with an improving economy. Eventually, the mixture of capital growth and ongoing rental return, will make their investment in stone and mortar pretty hard to beat,” he said.

However, Alexander said his comments should not be taken as a recommendation to start investing in residential property. “I have no idea how much further the market has to fall. A few months ago I took the view that we may see the first, hesitant signs of an upturn later this year but I now fear that this may not occur until some time into 2010.”

SCOTLAND ON SUNDAY, 26 July 2009



MY DECADE


A Glasgow townhouse at £1.5 million


Mortgage curbs have their upside


A tie does more than merely save your neck in a downturn


Is it worth it?


Top ten: Forget about property prices and home in on the rental income


Renting is as good a measure of economic confidence as buying


Stair way to heaven


Residential lettings give clue to wider economic performance


Back to the Future


Another of our properties is Sunday Times 'Rental of the week'


How first time buyers can lick stamp duty


Surge in residential lets despite fewer executive postings to cities


Where did it all go wrong?


Rents drive housing investment more than capital gain


Renting a home can be cheaper than you think


Coping with the credit crunch


Why there are still good reasons to invest in residential property


Labour of love


Yield is now the focus for buy-to-let investors


High-flying executives push up rental prices for city flats


One of our properties named Sunday Times ‘Rental of the week’


A flat-tastic prospect


Scotsman property editor gives star treatment to one of our homes for sale


Rise in new-build home sales offers glimmer of hope to battered industry


Capital tips to help you reduce tax expenses


Sunday Herald thanks D J Alexander


Why renting second home is best way to save cash – and face


A new code for letting agents


Sharp fall in corporate residential property rentals as firms suffer


Misery of the 'two-mortgage' trap


Buyers return but Scottish housing market still tight


Homing in on mortgage needs


Like two old-fashioned fairground favourites, the property market continues to be scary


Rise of the surprise landlord


Ask the experts


Energy ratings get a green light


EXPERT RECOMMENDS


Renting is a capital idea


EXPERT RECOMMENDS


BPF calls for a radical shift to rentals


Gloom stalks the housing market but ‘hockey stick’ revival is on the cards


More for your money


House prices 'won't recover until 2013'


Scotland's engine room may be on the brink of seizing up