By Kevin Baker, Marketing Manager (Brookdale)
There is so much conflicting information in the press and other media about the condition of the UK property market both from sale and rental points of view and much of it is regional. In this article we set out or thoughts on the current and predicted future condition of the let market in and around Peterborough
Tenant Demand
Tenant demand is, quite predictably, high. Someone from ARLA recently quoted "no-one could have predicted how much demand there would be". I found this confusing. Let's face it:
- Buy to let almost dried up completely following the recession due to lack of available finance products so there is less stock for more Tenants
- First time buyers have been finding it almost impossible to arrange deposits so mroe people are looking to rent instead
- House prices are still relatively high keeping people off the property ladder
- More people are losing their jobs and are unable to buy due to their credit status
- The list goes on....
However, one observation we have made is that Tenant expectations are higher now than they have ever been in our 21 years of letting. Why not? Many people renting a property now would have been first time buyers. Why shouldn't they want a home presented in good condition? In fact why would a long term renter not want a home presented in good condition?
Our Landlords are aware that, during the management of the property, we regularly make recommendations about improvements to properties during our regular inspections. Many of our Landlords have taken our advice and carried out these improvements. Sometimes not all at once - sometimes a bit here and a bit there. We have been making such recommendations for many years and in today's market this really has paid off.
We listen carefully to what prospective Tenants tell us when we show them your properties. One trend which is on the up is the feedback on the lines of "I have seen lots of properties today with other agents and yours are by far the best". We hear this literally every day.
We believe the feedback above is the result of:
- Only taking on properties which are in good condition
- Our Landlords ensuring that their properties are maintained and improved over time
- Our tenant selection criteria which includes inspecting the home of a prospective Tenant at the application stage
This would have been around 3 years ago which is just about enough time for an agent who badly manages properties to overlook issues at inspections/final inspections and place Tenants who do not look after their home.
Availability Of Rental Stock
Before the recession the number of properties available to let in Peterborough advertised on Rightmove (not an exact science but a trend for comparison reasons) stood at around 550 at any one time. At the height of the recession it almost doubled to a peak of just over 1,000. Obviously this was the result of the new phenomenon known as "the reluctant Landlord" and this pushed rental prices down.
Today (November 2010) that number stands at 540. However, this is not a true comparison as today there are a huge number of room-only lets advertised on Rightmove compared to pre-recession. Also there are more properties advertised by multiple letting agents, many of whom were born of the recession and the peak of properties available, some of whom have already gone bust!
So - we have higher Tenant demand, lower stock levels and yet we are not actually letting any more quickly than before the recession. A steady 30-50 properties per month. Why? The answer is that tenants seem to be taking longer to choose a rental property. This could be because the "well we will rent for a year then buy" plan is is not so common. Perhaps Tenants are looking at renting longer term so are taking more time to weigh up their options. If the latter is true then this is more good news for Landlords.
What About 2011?
I generally don't make predictions in the property market - to do so in a position where I advise buy to let investors would be foolhardy so below I set out what I "hope" will happen in 2011:
I hope that 2011 will be the "year for the Landlord". Rents are slowly increasing due to reasons above. However in making that statement I must add a footnote that some Landlords will still be asked to decrease rents for properties let pre-recession in order to fit into the current market. We did have many Tenants in the last 3 years ask for and receive a rent decrease but some are still paying "pre-recession" rents.
Stock levels will continue to fall as investors stay away from the buy to let market and more people turn to renting due to the tough financial conditions. The first quarter will see the usual frenzy of people moving after Christmas and the inevitable marital breakdowns over Christmas will see the one bedroom flats snapped up by marital breakdown casualties!
It will be at around the end of the first quarter that we will be able to see what stock is left. This will be an interesting time. The reintroduction of the "reluctant Landlord" has already taken place and seems to be gathering pace. Sellers are realising that if they haven't sold by the end of the month then the likelihood of completing in less than 2-3 months is slim. They could turn to renting instead. This is the unknown quantity in this message of "hope".
If we get another flood of properties from the sale market then stock levels could remain almost static and rents will not rise as quickly as we hope they will. If we don't then rents will rise faster.
In 2010 in some areas of London properties are being let on a "sealed bid" system where a number of people are invited to view then submit a bid - the highest bid rents the property! I don't think we quite will reach that point !! BUT - we will see an interesting shift in the positive direction with higher rents and shorter void periods. Call it "payback" time for Landlords who have suffered in many ways during this painful recession.