Is Sell And Rent Back a Potential Solution to House Price Falls?

It has been claimed that the hous prices are likely to fall between 15 to 20 percent this year. This prediction has been made by Capital Economics, a consultancy based in UK.

They have also forecast that the cost of renting will rise by almost 10-12 percent in the same period.

Many experienced investors and landlords believe that both go hand in hand. In other words when house prices fall, home buyers exit the market and chose to rent instead. This increases rental demand which in turn increases rental levels. In other words there is an inversely cyclical relationship between these two.

It is not just buyers pulling back their offers or exiting the estate agencies in droves. Many current home owners are selling their properties to rent because that way they can hedge their risk. They get what they can in today's market and then hope to buy the property back when the market has bottomed out, thereby making a profit.

Many homeowners are choosing to sell the properties to rent them back. Many smart home owners are also getting the buy back option from buyers, thereby fixing the future price of their homes.

21 August 2008

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