Recent numbers from the Department for Constitutional Affairs show that the number of court cases brought by mortgage lenders rose to 28,476 in the second quarter of this year. For those who don't keep track of these things, that's an increase of more than 50 percent from the same time last year. Also, there were 18,330 orders to take back cars, which was the most in 9 years.
Even though it hasn't reached the previous peak of around 40,000 repossessions in the second half of 1991, this is a very worrying trend for both homeowners and landlords who have grown used to constantly rising prices and historically low interest rates and have used their ever-growing equity to borrow money for a better lifestyle or to put down on more investment properties.
Gordon Brown has said that his economy has "low inflation," but the huge rise in house prices over the past few years proves him wrong. But it doesn't matter how shocked and horrified people act when they see another politician lie. What is VERY important is that the economy has stayed afloat because people have borrowed money to pay for rising home prices. Depending on whose statistics you believe, house price inflation is slowing, stopping, or even going backwards. This means that people have nothing left to borrow against and are at their limit. When added to the fact that the UK has almost stopped making things and relies on the service sector, which has little or no export value, this will hurt the economy in the near future.
So what does that mean for you as a landlord? This author doesn't think there will be a sudden, large-scale drop in prices like what happened in the early 1990s. This is because there are still more people who need housing than there are suitable and available properties. This is a simple case of supply and demand; people will still need places to rent.
But if the economy goes down hard, among other things that are too complicated to explain here, the government will have to pay the rent for a lot more people. In addition to putting a strain on taxpayers, this is bad news for private landlords who don't want to rent to people who get housing assistance. If you think about it, Housing Benefit is better than free real estate ads because there are always people interested and the checks never bounce.
Like in any business, those landlords who aren't open-minded will fall behind those who are. These are the landlords who have already opened their minds and embraced the income stream that comes from Housing Benefit tenants. Even though there may be problems right now, the council is working very hard to fix them and make the service what it should be.
