Having analysed 21 established property markets worldwide, The Economist magazine has compiled a list of the most expensive home prices when compared against rents.

The report reveals that Canada is the most overpriced property market of the 21 nations, with average prices 76% overvalued. 

Prices of homes in Canada are 54% overvalued when both rents and income were taken into account.

Properties in New Zealand were deemed the second-highest in the world at 68% overvalued compared to rents generated. 

Home prices in New Zealand were 20% overvalued compared with income. Prices were, on average, 44% overvalued, as compared to rents and income.

New Zealand was followed by the property markets in Belgium (65% overvalued), Singapore (60%), Hong Kong (58%) and Australia (48%).

The findings of the survey revealed that increasing rents are helping to cut into a backlog of unsold homes in many countries.

By contrast, BTL investors in the UK are receiving rental yield in excess of 6%pa. Add another third if you bought below market value, making better than 8%pa.

The north of England and Scotland are producing the highest rental yields, currently, as similar property to those in the south of England, may be purchased for between half and a quarter of the price.

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Capital Economics expects the housing crisis to end this year, according to their recent report. 

The average credit score required to attain a mortgage loan is 700 and whilst this is higher than scores required prior to the crisis, it is constant with requirements 1-year ago.

Additionally, a FED Snr Loan Officer Survey found credit requirements in the Q4 were consistent with the past 3-Quarters and other market indicators point not just to a stabilization of mortgage lending standards, but also a loosening of credit availability.

Banks are lending up to 3.5 times borrower earnings, up from a low during the crisis of 3.2. They are also loosening loan-to-values (LTV), which Capital Economics denotes is, the clearest sign yet of an improvement in mortgage credit conditions. 

 

In contrast to a low of 74% reached in mid-2010, banks are now lending up to 82%LTV.

With lossening credit conditions, most applicants now seem to be satisfying credit requirements, just 8% of contract cancellations were the result of a potential buyer not qualifying for a loan.

 

CE added, any improvement in credit conditions won’t be significant enough to generate actual house price gains, and potential ramifications from the euro-zone pose a threat to future credit availability.

Remember, you don't have to pay full market value for a property, when you can buy at significant discount.

Landlord told to pay £2,000 after neglecting fire safety.

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The number of people renting accomodation in the private sector has nearly doubled in the last 10-years jumping from 2.5 million to 4.8 million, and demand is showing no sign of abating any time soon.

Rental Britain, a new report from Savills and Rightmove, predicts 1:5 (20%) of households could be in private rental accommodation by within the next 4-years.

The report forecasts that £200 billion investment will be needed, but claims only £50bn of this is expected to come from Buy-to-Let funding.

It reveals the gap would be filled by institutional investment in new-build rental accommodation, but the report goes on to say that this needs to be recognised by the planning system as shortage in supply is making certain areas unaffordable. Rent rises across Britain averaged 5.2% in 2011.

In London, private renting now accounts for more housing stock than social renting. That's 900,000 (27%) private properties versus 783,000 (24%) of local authority properties.

The report estimates that last year, Britons paid around £48bn in rent to private landlords. This is expected to rise to £70bn within 5-years, a jumb of 31%.

Lucian Cook, Director of Savills residential research said, Meeting the growing demand for private renting and the changing profile of tenant demand are perhaps the greatest challenges facing both the housing industry and policy makers ... The dynamics of supply and demand make a great case for investment in this sector, and rising rents and lower capital values have begun to attract private investors back into the market ... Investment returns relative to other asset classes will dictate the pace of investor entry to this sector.

 

This is most definitely the era of the Landlord/investor.  Current property stock is typically available at 25% discount, but as the market regains its strength, this margin must diminish. 

The Bank of England’s Monetary Policy Committee (MPC) unanimously voted to hold interest rates at the historic low of 0.5% this month.

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We recently reported that the UK is probably the worlds No.1 destination for Further Education.

 

As well as British demand increasing rapidly, the far east also sees the UK as hallowed ground for advanced education. 

 

Planning ones education in this fast changing world is a good long-term investment in the future, so is investing in property to accomodate under-grads! 

Put the two together and we think you have a recipe for exceptional, longer-term returns for the savvy investor.

 

The perceived down side of student accomodation is that some people think of students as disreputable, reprobates leaving the remains of yesterdays takeaways and beer can pyramids lying around. Feedback from experienced student landlords however, contradicts this general view especially where there is in-house management. 

 

Student buy-to-let investors should really be seeing pound signs before their eyes. Last year alone investors bought in excess of £347 million of student property (source CB Richard Ellis).

 

Traditionally, letting property to students has been on a per-room basis with landlords enjoying average rental yield of *6.45%, when compared to 5.94% from properties rented out to young couples. 

Outside of London, the West Midlands is proving to be a goldmine for investment in student property. Home to 9-universities, including Warwick and Birmingham, the West Midlands offers the some of the highest yields.

 

Yorkshire too, wasn't far behind! This region is a hive of student activity with 14-potential locations to choose from including Leeds, York and Sheffield.

 

Demand for student property shows no signs of abating any time soon.

 

Students (or their parents) are willing to pay inflated tuition fees for education perceived to be the best in the world. So, it is well worth making your educated decision to add student property to your portfolio in 2012. 

 

*increase this by 30% for discount purchase. 

The Chancellor George Osborne recently committed to vigorously encouraging Chinese investment in Liverpool City, where the Asian tiger can invest in student accommodation.

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