Rents growing faster than house prices

Increased demand for rented accommodation has caused rents to grow faster than house prices in the first half of 2007, according to Paragon Mortgages.

Paragon’s July buy-to-let index shows that average rents have risen 12.8% to £10,938 in the first six months of 2007. During the same period, property prices have risen just 10.5%, from £162,776 to £179,793, according to Paragon.

John Heron, managing director of Paragon, says: Rising borrowing costs deter many people from committing to buy a home, as they defer their property purchase decisions until the interest rate outlook becomes clearer. Instead, many will choose to rent from a private landlord, leading to a further expansion in tenant demand for rented properties.”

The Paragon index also found that rental yields have remained stable at around 6% during the past year, generating an attractive return for investors.

However, Paragon also warn investors to remain cautious and make prudent decisions when expanding their portfolios.

This is not the time for speculative investment in off-plan new-build schemes, or indeed for advisers to recommend self-cert mortgage products with no rental cover, without being fully satisfied that the customer has other sources of income” says Heron.

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Efendy has been incapable to kip for threesome days. It's not the aftershocks that uphold to rattling the tsunami-stricken mandate guardianship him sleepless, but the orderliness he conventional to move out of his rented menage.
"The house owner doubled the rent," sighed the 38-year-old, who has been renting the house in Lamlagang, Banda Aceh, for three years.
When the tsunami hit on Dec. 26 the house suffered only minor damage, a crack here and there.
But Efendy's problem began subsequently the cataclysm. With the arriver in Aceh of so many aid workers and volunteers, including foreigners, some sounding for places to rent, the proprietor of Efendy's menage definite to resurrect the rent to Rp 6 cardinal (US$666) a year.
If Efendy cannot come up with the money by next week, the owner wants him to leave.
After losing many of his relatives in the disaster, Efendy has no one to turn to for help.
"I wonder where I will take my family and belongings," he said.
Asnawi's rented house is being leased by a foreign NGO for a year, at 10 times the Rp 6 million Asnawi used to pay.
Asnawi said he could never afford to pay that much so the owner wants him out.
"It makes me sad to be treated like this," Asnawi said.
With thousands of houses destroyed in the disaster, thousands of Acehnese are now living in shelters and are in dire need of housing. While some wealthy Acehnese can afford to rent houses, many others have to compete with newcomers living temporarily in the province.
Rents in the province have skyrocketed in the province. In some places, rents have jumped by as much as 1,000 percent.
Before the tsunami, a five-room house rented for about Rp 5 million a year. Now prices have jumped to as much as Rp 120 million. Some foreigners are reportedly paying as much as Rp 40 million per month for houses far from the coast.
House owners are certainly happy with these developments, many evicting longtime residents in order to make a quick buck from the tragedy.
"There's no harm in renting our houses to foreigners, (we're) helping them," said Abdullah, a house owner.