Bexley Rents to Rise Quicker Than Bexley Property Prices in Next 5 Years
The next five years will
see an interesting change in the Bexley Borough property market. My recent
research indicates that the rent private tenants pay in Bexley Borough will
rise faster than local property prices over the next five years, creating further
issues for Bexley’s growing multitude of renters. In fact, my examination of
statistics forecasts that: By 2022,
Bexley Borough’s rents will increase by 21%, whereas Bexley Borough’s property
values will only grow by 19%.
Let me explain why I have
come to those conclusions:
Over the last five years, Bexley
property values have risen by 67.7%, whilst rents have only risen by 9.7%.
Throughout the last few
years, and compounded in 2016, tenant demand for rental properties continued to
rise, while the press stated that some landlords expect to reduce their
portfolios in the next couple of years. This means that Bexley Borough tenants
will have fewer properties to choose from, which will push rents higher. In
fact, talking to fellow property professionals in the area, the Bexley Borough
lettings market appears to indicate privation and a shortage of new rental
properties.
Landlords have some
intriguing challenges ahead of them in the coming years. Above all, the Tories
have changed the taxation rules for landlords in terms of how buy to let
properties are to be taxed. By 2020, landlords will not be able to deduct any
of their mortgage interest from their rental income before calculating their
tax bill. Instead, they will receive a 20pc tax credit.
A similar scenario has
already played out in Ireland. The Dublin government first withdrew landlords'
ability to deduct mortgage interest costs on new mortgages from their rental
income in 1998, but reinstated it in 2002. In 1999 and 2000, rents rose by 10.5pc
and 14.6pc year-on-year.
On top of that, a ban on
letting agent fees is expected to come into force, probably in 2018. When that
happened in Scotland in 2012, Scottish letting agents passed on those fees to
their landlords, who in turn increased the rent they charged to their tenants.
To Theresa May and Philip
Hammond, I would say that they must be wary about indicating both red and green
lights to the private rented sector. They can’t expect the armies of small
private landlords to continue to house around a fifth of the population and
then tax the hell out of them. They didn’t invest in buy to let as a charity or
to satisfy any philanthropic urges. Something has to give – and that will be
significant rent rises over the coming few years. Before anyone makes derogatory
comments about landlords, consider that if it wasn’t for landlords buying all
these buy to let properties over the last 15 years, I am not sure where
everyone would be living today – because most of the Council houses were sold
off in the 1980s!
The real issue, as I have
said on several occasions, isn’t the number of landlords, but the low supply of
new homes to fulfil the high demand of the naturally growing population. High
demand with low supply equals high prices – it’s simple economics, but a topic
for another day. The current changes won’t resolve this economic problem, but
they may contribute to ‘cooling off’ the rate by which property prices
increase. I don’t believe that they will completely bring that increase to a
halt.
With the challenges ahead,
and with the budget, house price inflation will be tempered over the coming
five years in Bexley. As I have discussed in previous articles, the number of
properties on the market in Bexley remains close to historic lows, which is
good as it keeps houses prices relatively stable, but less good in the way it
impedes choice for buyers. This is why I believe property values in Bexley will
only be 19% higher in five years’ time.
On the other hand, amid
the challenges facing landlords and the significant shortage of new homes being
built, Bexley people still need somewhere to live. If they aren’t buying houses
and the local authority isn’t building thousands of council houses, because
they have no money, with the average rent for a Bexley rental property
currently standing at £1,081 per month: Over the next five years, I predict the average rent in Bexley
will rise to £1,308 per month
These are interesting
times. A buy to let in Bexley Borough is still a sound investment choice.
Landlords will just need to be smarter with their investments.
If you are looking for
advice and opinions to help you meet your investment goals, one place you can
find more information is the Bexley Property Blog www.bexleyproperty.co.uk, or why not pop into our
offices in Bexley Village or call 01322 559955 to have a chat.
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