“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 last week.
Some
commentators are saying that 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 sales 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 Chichester is only going in one
direction – and not the direction the papers say it is going.
According
to Sheffield University, buy to let landlord 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% by 2032 (today it is 58% in
Chichester) while the rate of private sector renting will increase to 35%
(interestingly, in Chichester it stands at 22% today). Therefore, the demand
for rental accommodation in Chichester is expected to grow by 1,793
households’.
Chichester
property values over the last six years have risen a lot more than average
salaries, and as mortgage availability is dependent on your ability to pay, this
means the dream of owning your own home is out of reach for many. This is 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 3.26m to 2.18m
– a drop of 31.1%).
Now
it’s true that the Government’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 (an initiative
offering a 20% discount for first time buyers). But if you are unable to save
for the deposit, none of this means anything to the “20 somethings” of
Chichester who still need a roof over their heads!
Currently
3,035 households live in private rented accommodation in Chichester. These are
big numbers and a sizable chunk of the electorate. So whilst it appears
Chichester’s “Generation Rent” will continue to rent and not to buy for the
reasons set out above, Chichester’s buy to let landlords will be lifted by the
projections of greater rental demand. Chichester and the area around it still
offers the prospect of strong economic growth forecasts and has a reputation as
a very desirable place to live.
Taking
into account the projections from the experts at Sheffield University, the
number of households in rental accommodation in Chichester will rise to over
4,800 in the next decade or so. This prediction in growth is even on the back
of the Government clamping down on tax reliefs for landlord’s.
Gone
are the days of making guaranteed returns on buy to let 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. Landlords must take a more considered approach to their
existing and future portfolio, especially in Chichester. The balance of capital
growth and yield, especially in this low interest rate world we live in, means
Chichester landlords need to do more homework to ensure the investment in
property gives the desired returns. One place for local landlords and
homeowners to visit for such information is the Chichester Property Market Blog
– www.chichesterproperty.com
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