Buying property to let in the credit crunch

Jan 29 2010 By Mary Barabe

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While in many respects it's true to say that the property bubble has well and truly burst with the onset of the recession, in the last six months there has been a huge rise in the rental property market as increasing numbers of people turn to renting properties rather than buying them.

One reason for this turnaround in the market is the fact that the recession has meant that many people can no longer afford to pay their mortgage and have had to sell their house and rent accommodation until the financial climate improves.

This could be because they have been caught up in the recent job losses which have hit many industries, or because rising interest rates have pushed their mortgage payments to unmanageable levels.

Another reason for the rise in rentals is that first-time house buyers are finding it more difficult to secure mortgages on the properties they want. Thanks to the credit crunch, banks are more reluctant than ever to risk lending large sums of money to individuals.

The difficulty in finding a mortgage also extends to people who have just sold their house. Many are being forced to rent temporarily as they look for a new mortgage to buy another property.

If you are lucky enough to have the funds to buy a property to let, now is a good time to do so. There is a shortage of properties on the rental market, and at the moment demand is high for good rental accommodation.

The Government has promised to increase the UK's rental stock, but this will take time, particularly given the depressed state of the construction industry at present.

Back in the eighties, the Government introduced a scheme whereby council tenants could buy their houses at greatly discounted prices. Many people took advantage of this offer, and, as a result, council housing stock was greatly depleted. Councils today do not have enough rental properties to meet demand.

To counter this, the Government implemented the Private Sector Letting scheme. Under this scheme, people who have a property to let can rent it out through their local council. The council is responsible for managing the property, and - perhaps best of all - rent will continue to be paid by the council even if the property is vacant.

This is an excellent option if you have a property to let and want to receive a guaranteed income with the minimum of fuss. It is a particularly good scheme for new landlords who may lack the experience to manage their investment most effectively.

Buying a property to let is a huge investment, and anyone who does so should be sure that they obtain a steady income from it. Today's rental market is experiencing a huge surge in demand, and property owners can take advantage of this situation.