Buy to Let – Demand and Supply
I have been looking very closely at the local rental market over the last month as there are a number of new developments in the area which would be suitable for buy to let investors. I am currently advising landlords on which would make the best investments and this has involved looking at the local market in some depth and I thought I would share this information with you.
The number of rental properties in the Horsham District has increased by a staggering 71% over ten years to meet the demands of a fast growing rental market. Our ageing population are paying off their mortgages and investing their pensions in property, resulting in the younger generation being able to move out of their parental home and into rental properties. This has now been going on for some time and we are now seeing a real shift to the ‘Generation Rent’ the press continues to report on.
This year, only approximately 3% of these rental properties in the Horsham District are becoming re-available each month. It is clear from this that supply is not currently meeting demand, there are a number of tenants applying for each property that does become available. This is largely due to the fact we are seeing people settle into their rental homes for much longer periods than previously.
As Generation Rent starts to age, couples who are renting decide to have children, moving to more spacious properties close to the local schools and stay in these properties to raise their families. This results in those people in the smaller properties then staying there longer and brand new tenants finding it harder to get on the rental ladder due to the lack of supply.
This lack of supply is causing rents to increase. HomeLet figures for the South East show the average rent in the 3 months to August this year at £962, whilst last year’s figure over the same period was £899, giving an annual variance of +7%. People are paying more to secure the properties they want, which is why the brand new developments are so attractive to buy to let investors. These properties have well designed layouts, neutral décor, new quality kitchens and bathrooms and will not be subject to the maintenance issues that perhaps older properties are. The tenants want these modern properties or an older home that has been well maintained and nicely presented.
Talking to a number of local landlords they are keen to know the return on investment from these new properties as they look to expand their portfolios. A number are looking to use their pension funds to do this now the rules have relaxed on how these monies can use used. However, for those who need to raise funds to purchase new rental properties, there are now over 1,000 buy to let mortgage products available giving a huge choice of some really great products.
Posted on 4 January 2016