Should You Invest In Property To Rent In 2008?

Property investors have had it good for the last few years.

It's been pretty easy for lots of people in many areas of the country to make money buying a property to rent as a long-term investment.

All you needed to do was get the basics right: pick your target market carefully, find a good location (rural property has been especially popular), and buy a home for less than its market value... old fashioned homes that needed updating were perfect for this.

But looking forward, the future doesn't seem so clear for 2008 onwards. There are several issues that could affect both the short and long-term returns from property to rent.

First off is the question of house prices. Prices may have gone down in some areas; certainly there seems to have been a slowdown in growth of prices across the UK. This affects how many houses are put on the market, and therefore the supply of buy-to-let investment properties.

Interest rates have also had an effect on how much profit you can make from property to rent. There have been five rate rises since August last year. Many believe we are due for the rates to drop at some point over the next few months - maybe even when the next interest rates announcement is made next week.

And the other issue that has affected the housing market significantly is the introduction of Home Information Packs, or Hips. They were introduced for four bedroomed houses on 1st August this year, extended to three bedroomed properties on 10th September, and will be extended to all houses from Friday 14th December.

Experts believe they have slowed down the number of houses put on the market this year and may continue to have an impact next year. Over time, people will get used to the need to put together a pack of documents before putting their house up for sale.

So those are the issues which have affected investors this year. But there is good news from two investment firms, for people looking to buy more property to rent next year.

Investment firm Assetz believes 2008 will be a strong year for investors and the buy-to-let market will benefit from high levels of demand.

It has looked at a prediction from the Council of Mortgage Lenders that house price growth will be just one per cent in 2008.

The firm says that is nonsense. It believes the effect of market forces will push growth to 5% next year. The firm's analysts think lower interest rates and a lack of supply of houses will push prices up.

And if you are an investor in property to rent, there's even more good news. Assetz thinks 2008 will see an increase in the demand for rental accommodation.

This year demand went up by 10%, and it thinks that figure will be the same next year. It says its predictions appear to be supported by analysis by the Royal Institution of Chartered Surveyors and the Association of Residential Lettings Agents.

Meantime a study from a different investment company appears to back up the prediction.

Property for Life's figures show interest in property to rent rose in six regions across the country between June and November this year.

In one area, the Midlands, the number of people who registered interest in property to rent went up by a staggering 25 per cent. Enquiries from people in the south west also went up significantly.

It also points out that investors will benefit next April when the new flat rate of capital gains tax comes into force. It was outlined by Chancellor Alistair Darling in his pre-Budget report.

So all in all, it does look like 2008 could turn out to be another good year to invest in a house to rent out.