We've reached the tipping point of a balanced rental market: Ewan Morton

Is there a tipping point in real estate? When it comes to the balance of the rental market I think there is. And I think we might have just reached it.

By ‘it’ I mean that fleeting moment when the affordability and rental outlay comes into balance. It is a very delicate balance that occurs very rarely and I predict will not last long.

Right now we are seeing an increase in renters looking to take advantage of the low interest rates and purchase their own property. For many, mortgage repayments are in line with rental payments. Sure rates have been low for a while now but it seems many long-term renters are only now finding the confidence to get out and invest. Perhaps they are motivated by a fear that rental availability and affordability may be set to decline.

At the same time we are also seeing rapidly growing interest from property investors looking for buy-to-let opportunities. They have seen the steady increase in demand and are keen to get into the market while prices are still reasonable. 

And that’s why the balance we are seeing right now is so rare and so fleeting. Demand from both the investor and the first-time buyer will quickly tip that balance.

The question is which way?

I think that is dependent predominantly on the mood of the investors. Will investors baulk at higher prices and withdraw from the market with a view that the rental returns will not be sufficient to fund the purchase? Or will they continue to see value in servicing the rental market and therefore be prepared to invest even as prices rise?