Could the remarkable boom in US property prices come to an end? Some analysts think so, but with prices stalling, property investors have another rich vein of opportunity – the booming rental scene. As the US moves into the post-COVID-19 phase, buy-to-rent investments appear incredibly lucrative.
Much of this trend stems from the economic problems in the United States, the difficulties of COVID-19 and these mega price increases over the past year. Although many experts expect the rise in house prices to stabilise this year, with the NAR predicting a moderate 6% rise, buying property is still out of reach for most people, forcing them to stay longer in the rental sector.
Many other people decided to keep a hold of their savings and see what the market does over the next couple of years. COVID-19 warped the housing market in many unexpected ways, and people who might have been ready to buy may want to let the market settle down. Rising inflation and the prospect of further increases in mortgage rates make homeownership a more difficult proposition.
On the other hand, it is positive news for landlords. It means more people are coming into the rental market, many of whom might usually have been buying. With wages continuing to rise, there is a larger class of high-value renters available competing for higher-value properties.
In part, this is also a lifestyle change. Millennials have shown themselves less eager to buy than the previous generation, and similar attitudes are developing within generation Z. We are going from an environment in which buying was the norm to one in which renting is the default option for many.
It comes with several advantages. Renting makes it possible to afford a higher quality of homes than people might be able to buy. For those who want a higher standard of living in the short term rather than straining their finances to purchase a low-cost house, renting is more attractive.
Whatever the reason, landlords enjoy a positive environment in which demand is rising, with the kind of renters they dream about – people with money and a high income ultimately representing a low risk.
And this high demand is pushing up prices and yields. Rent prices rose rapidly over 2021, and NAR is predicting rental prices to outstrip house prices at more than 7% over the coming year.
The US is also seeing growing demand for city apartments driven by a move of people back into the cities. The pandemic prompted many people to move out into the country, in search of wide-open spaces. However, for many, this experience has not been everything they hoped for, and with things slowly going back to normal, they are returning to city centres.
However, this evolving market does come with challenges. Renters are becoming more demanding of landlords, especially those in the high-income bracket. They see themselves paying more every year and expect to see something in return. Those renters who will be delivering the biggest profits will be people with choice and expectations.
Being a landlord always comes with its own set of challenges and complications with taxes and other regulatory hoops to jump through. Property management companies are in growing demand as they offer ways to relieve landlords. Despite the challenges, buy-to-let in the US is becoming an increasingly rewarding and profitable opportunity.
Contact us for further information on real estate opportunities in the US.