It is 1989, The buy to let idea had not been born. The BES - Business Expansion Scheme was still in vogue, however interest rates on mortgages were at 9.8 percent in May 1988, were facing a situation whereby they were paying 50% more.
In The Independent article featured here a young professional couple had overstretched themselves to buy a £300,000 dream house in South London. They did not want to sell, so they did what a lot of people did, rent out the property and move abroad. Had they sold they would have made a great loss and we were then in the era of "negative equity".
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Philip Suter who runs jml Property Services was on the National Council of ARLA (The Association of Residential Letting Agents) and reported in the article "But says Philip Suter of the Association of Residential Letting Agents, demand for rented property, especially at the bottom end, has gone up. He says his Home Counties firm Frank Farr-Property has seen a marked rise in enquiries from young people in particular. "A lot of young people who would once have bought are now renting" he says. "They aren't in a hurry to buy, because they don't think prices are going to go up. And they are wary. They've heard stories about people who bought last year and now need to move for their job but can't sell.
The article then went on to say......
BES rents have varied widely even although the Government places an upper limit on how much it can spend on individual properties of £125,000 in London and £85,000 elsewhere. But as a general rule, says Mr Goodwin (of the London Research Centre) BES Companies aim for what is called a "yield" of around 8-9 per cent. This means that they aim to charge a yearly rent for the property equivalent to around 8 per cent of its value. Typically BES companies have been charging upwards of about £500 a month for one-bedroom flats in London.
Other agents bear out the use of an 8-9 per cent yield as a rule of thumb. Philip Suter says that in the Home Counties a landlord can expect to get about £500 a month in rent for a two bedroom flat and around £3,000 a month for a luxury house worth £500,000.................. in 2006 you could be talking about £700 to £850 for that two bedroom flat and the house around £3,500 - however the house price of £500,000 would be nearer £1.5 million plus!
Source of images, unless otherwise stated - Suter family archives