Thursday 7 April 2016

Chelmsford’s ‘Generation Rent’ to grow by 1,249 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 Recess Coffee Shop on Barrack Square in the city. Whether you are a landlord of mine (or not as the case may be), I am always happy to look over any properties you are thinking of buying for buy to let purposes and more so over a coffee!

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 Chelmsford 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 70.8% in Chelmsford) by 2032, while the rate of private sector renting will increase to 35% (interestingly, in Chelmsford it stands at 13.2% today).

Therefore, the demand for rental accommodation in Chelmsford will grow by 1,249 households in the next five years ... and these are the reasons why, irrespective of the distractions set out in the newspapers
Chelmsford property values over the last six years have risen a lot more than average wages/salaries, meaning as homeownership and mortgage availability is dependent on your ability to pay has served to push home ownership 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, 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 something’s’ of Chelmsford ... and they still need a roof over their heads!

Currently, 13,864 people live in private rented accommodation in Chelmsford

These are big numbers and a sizeable chunk of the electorate. So whilst it appears Chelmsford “Generation Rent” youngsters will continue to rent and to not to buy for the reasons set out above, Chelmsford buy-to-let landlords will be lifted by the projections of greater rental demand. Chelmsford 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 meant 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 Chelmsford (interestingly, I have already been chatting to a few central London landlords after they read the Chelmsford Property Blog).

So, by 2021, the number of rental properties in Chelmsford will rise to 8,594

This prediction in growth of the Chelmsford rental market is even on the back of 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 Chelmsford. The balance of capital growth and yield, especially in this low interest rate world we live in, means Chelmsford landlords need to do more homework to ensure the investment in property gives the desired returns. One place for Chelmsford landlords and homeowners to visit for such information is the Chelmsford Property Market Blog. www.chelmsford

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