Generation Rent in Medway to grow
by 3573 households by 2021
“The growth of the private rented sector, and the arrival of an investor class of buy to let landlords within it, is an issue that won’t be going away anytime soon, no matter what you read in the Daily Mail”, I said, as I chatted over a coffee with a landlord client of mine at Boomers on Dockhead Road in Chatham. Whether you are a landlord of mine (or not as the case maybe), I am always happy to look over any properties you are thinking of buying for buy to let purposes and more so over a vanilla latte!
Some commentators are saying buy to let is about to die, with the new stamp duty changes and how mortgage tax relief will be calculated. Some say 500,000 rental properties will flood the market nationally in the next 12 months as landlords leave the rental market. Have you heard the phrase ‘Bad news sells newspapers’? Let me explain why buy to let in Medway is only going in one direction – and not the direction the papers say they are going.
According to Sheffield University, buy to let landlords will continue fuelling the growth of the private rented sector in the coming decades. By their estimates (and they are considered a centre of excellence on the topic), the rate of homeownership nationally will fall to 50% (today it is 67.8% in Medway) by 2032, while the rate of private sector renting will increase to 35% (interestingly, in Medway it currently stands at 17.6%).
Therefore, the demand for rental accommodation in Medway will grow by 3,573 households in the next five years ... and these are the reasons why, irrespective of the distractions set out in the newspapers
Medway property values over the last six years have increased a lot more than average wages and salaries. This means that, as homeownership and mortgage availability is dependent on your ability to pay, home ownership has been oushed further out of reach for many, at a time when the stock of council houses has actually withered. (Nationally, the number of council houses in the last ten years has dropped from 3.16m to 2.18m households - a drop of 31.1%).
Now it’s true the Tory’s efforts to fix the deficiency of affordable housing have focused on those who want to buy a home, ranging from Help to Buy and their much vaunted Help to Buy Isa, and Starter Homes Scheme but if you are unable to save for the deposit none of this means anything to the 20 something’s of Medway ... and they still need a roof over their heads!
Currently, 44,016 people live in private rented accommodation in Medway .
These are big numbers and a sizeable chunk of the electorate. So whilst it appears that Medway Generation Rent youngsters will continue to rent and to not to buy for the reasons set out above, Medway buy-to-let landlords will be lifted by the projections of greater rental demand. Medway and the area around it still offers the prospect of strong economic growth forecasts and has a reputation as a lively and desirable place to live. You see, with the new rules on tax, more and more landlords will be looking to move away from the previous honeypot of central London, because its higher prices mean lower rental yields. With the new tax rules and central London’s cooling of house price inflation, more and more landlords will look further afield, including Medway (interestingly, I have already been chatting to a few central London landlords after they read the Medway Property Blog).
So, by 2021, the number of rental properties in Medway could rise to 24,567
Remember, this prediction in growth of the Medway rental market accounts for the government clamping down on tax reliefs for landlords. The point is this, gone are the days of making guaranteed returns on BTL property. For the last 20 to 30 years, irrespective of which property you bought, making decent money on buy to let property was like shooting fish in a barrel – anyone could do it. But not now. You must take a more considered approach to your existing and future portfolio, especially in Medway. The balance of capital growth and yield, especially in this low interest rate world we live in, means Medway landlords need to do more homework to ensure the investment in property gives the desired returns.
I offer free and impartial advice whether you are looking to buy your first investment property or already have a sizeable portfolio. Feel free to email me HERE
1. Numbers on current figures taken form the Office of National Stats from the Census.
2. Assumed growth in rental figures using the the average of a number of commentators predictions of the growth of rental market nationally from 15.6% to 22% by 2021.