'Higher dividends' for property investors renting stock

UK property investors now aiming to rent rather than sell houses look set to enjoy higher rental incomes, according to a leading consultancy firm. Knight Frank said demand in the letting market is increasing by as much as 30 per cent on a year-on-year basis. Rents grew by as much as 16 per cent in central London alone during 2007.

The firm also said there had been a “noticeable change in sentiment”, with renting no longer seen as a short-term option. House hunters are now more likely to see renting as a more flexible option offering better value than buying, the company added.

Knight Frank’s head of residential research Liam Bailey said:

“With rents rising and property values falling, it will soon begin to make more sense to own property purely for the rental income.

“This will, in due course, attract more professional property investors into the UK rental market.”

He added buy-to-let investors prepared to “stay the course” would see dividends from the market in time. He also said Knight Frank’s view is house prices will most likely see a peak-to-trough fall of around 20 per cent.