With the market uncertain at best, Burrell says that a change in personal circumstances has forced her to re-evaluate her options and, like an increasing number of canny individuals who previously would only ever have conceived of themselves as owner-occupiers, she has become a tenant for the first time.
Her job involves regular travel, so Burrell has swapped Fife for a slick new two-bed apartment in Davidson’s Mains, Edinburgh, within easy reach of the airport and Waverley railway station. So many builders, developers and homeowners now require regular cash flow from their hard-to-shift assets that Burrell says there are rental bargains to exploit until she finds herself in the optimum position to re-enter the market as a buyer when prices bottom out.
Burrell says: “My new home is spacious, contemporary and well fitted out and at £650 per month it is significantly cheaper than the rent my friend, who lives in Leith, is paying for a similar flat. Rents have gone up in the past year but there is a lot of choice for would-be renters and that means landlords are prepared to do deals.”
Burrell says that after the nerve-shredding reality of buying homes during the boom, the reality of renting in a slump is refreshingly straightforward. “At the peak of a boom, you are almost railroaded into bidding for homes for fear of missing out if you think too long about it. As a renter now, you are spoilt for choice. Everyone wants your business and there is not the same ongoing financial worry and responsibilities that comes with ownership.”
Karen Freeland, a nurse, is a landlord a year after moving into a new home with her boyfriend. She says: “I have a flat in Dumbarton and, rather than sell it for a price I’d be unhappy to accept, I prefer to rent to protect my asset in the short term. Like a lot of people, my concern is covering my costs, rather than turning a profit and I took advice to offer a lower rent in order to ensure getting good tenants who won’t leave me with void months to fill.”
Craig Scott, of Regents Estates, who is a leading financial adviser and also a Financial Services Authority lecturer, says that rents have risen by about 10%-15% in Scotland’s urban centres over the past 18 months. That is good news for those with homes to let, but Scott says: “So much stock is on the market that rents could fall again.
“There is an industry perception that there is an increased demand for rental property and the number of specialist rental companies in Scotland has doubled in the past 12 months.
“We are seeing agents such as Your Move developing a rental arm to protect their market share in a climate where sales are down by as much as 50% in some markets. These new entrants into the market will be looking to be as competitive as they can and that will be reflected in the deals that they offer to renters.”
Clearly, though, those with Burrell’s flexibility are ideally placed to exploit a complex but opportune situation.
DJ Alexander, for example, is marketing homes that don’t usually come up for rent. At £2,350 a month, the rental agent has a four-bed, mid-terrace house in Newington, Edinburgh, typical of homes that in a boom would sell for a premium price. Another property, in Barnton, in the city (at £2,600 a month), is in a preferred school catchment area.
Most market analysts agree that prices have fallen in the capital, but can’t agree by how much. HBOS says the fall is 1%, the Edinburgh Solicitors Property Centre (ESPC) says 6.5%, and privately many city agents say that some homes have fallen in value by as much as 5%-10%. Just 400 sales were completed in August, compared with 985 during the same month in 2007, says the ESPC.
David Marshall, its business analyst, says: “There is more supply than demand, sales volumes are down and average prices are falling. Buyers are in a strong position to negotiate prices downwards in a marketplace where competition is limited due to borrowing constraints on entrants to the market.”
He adds: “There are no expectations of sizeable falls but there are two constraints overshadowing everything — a lack of credit for first-time buyers and affordability issues following an unprecedented period of growth.”
There are huge numbers of would-be buyers who can’t buy as a result of tighter borrowing requirements and would-be sellers who won’t sell because they feel they would have to accept too low a price for their homes.
David Alexander, owner of DJ Alexander, says: “The context comes from a lack of confidence in the sales market. We brokered 182 rentals in July, smashing our old record of 135. Business is up by 30%-40% as clients rent out properties that would usually be offered for sale.”
Alexander says that once assumed annual capital growth is taken out of the equation, the attractions of rental over ownership are clear. “There is no stamp duty and taxes, no legal fees, a fixed rent each month to budget against. There are no costs associated with ongoing maintenance and upgrading and you can terminate your lease agreement at short notice if your circumstances change. At the moment there are great value homes available.”
He says: “These dominant market conditions could prevail for the next 18 months or more, but once the mortgage finance situation is addressed prices will recover quickly. There is a window of opportunity for renters, but it may not last indefinitely."
THE SUNDAY TIMES, 5 October 2008