What's happening with rental prices?

Recently, there's been a lot of talk in the national press about an increase in rental prices. People are beginning to struggle to buy houses currently due to the new strict lending criteria, and people also aren't moving out of rental property, so if you're looking for somewhere nice to rent, it's a lot harder to find something than it was say 12 months ago.

So have we seen rental prices increasing as a result? Certainly not across the board is the answer, and there are probably a few reasons for this:

1.               The natural time to change the rent is when your tenant vacates and you have a new one going in - only this isn't happening much at the moment. To change the rent, landlords have to apply for an increase mid tenancy - and whilst there is confidence in the market, it's still a brave landlord who calls his tenants bluff and risks losing them over a small rental increase.

2.               Property condition remains a massive factor in a Landlords ability to increase rent. When the newspapers state there is a shortage of rental property, they mean a shortage of good quality rental property. Whatever the market conditions, there's never a shortage of poor quality property to rent, and it's always hard to command a premium rent if the property is in poor order.

3.               In certain sectors of the market, there's still oversupply of property. Two bedroom apartments in Margate for example, are still in plentiful supply (70 out of the 148 properties currently available to rent in Margate are two bedroom flats), and getting a significant rental increase in this area is tricky business.

And what does the future hold for rental prices?  This isn't an easy question to answer, and if you ask three different 'experts', you'll get three different responses. As such the brutally honest response is probably "who knows"!

From my own perspective, I believe very strongly that the answer remains tied in to people's ability to buy property - as long as this remains difficult, people will have no choice other than to rent. This should keep demand high, and hold prices up too. If you are a landlord that has good quality property, you shouldn't have a problem 1) attracting a good quality tenant and 2) charging a decent rent. This hasn't always been the case though, so don't 3) start to think it's the norm and 4) base your future financial decisions on it!

Pop in and see us along Northdown road for some impartial advice if you are thinking of investing in property OR if you want me to look into a specific area or property for you then why not email me the details and I’ll happily help you out. (gavin.horton@belvoirlettings.com)

Whilst dining out the other evening the fire alarm went off in the restaurant, the waiter, who had been making me laugh all night, was quick to allay everyones fears with the following quip!

Well I thought it was funny!

The importance of an exit strategy

One of my landlords who has property in a number of UK towns came to the office for a coffee the other day and we got on to the subject of exit strategies. The three properties he has in Ramsgate, he told me, will be sold in 2019 and 2020. This was interesting, because the guy had genuinely planned to the last detail how he was going to exit the investment property market. How many other landlords could honestly say they had thought this far ahead?

Probably most haven’t, but they should. I asked a couple of other people I happened to speak to in the next 48 hours when they would exit the rental market, and got the sort of answers I expected – “in a few years when prices are higher” or “never, I want the income instead of a pension”. Some will get lucky and earn a few pounds in the process, while others will make less than they should have. The ones that make the most when they sell, will be the ones that have done proper research, made proper plans, and tied their property portfolio in with the rest of their financial affairs. Things they will look at include:

· What will it cost me to sell my portfolio?

· Will I incur loss of rent during the sale process?

· What are the mortgage implications (redemption penalties etc)?

· Are there leasehold implications (will I need to renew the lease before I sell)?

· What are the capital gains tax implications?

· Could there be an inheritance tax issue?

· What will happen to the proceeds of sale?

· Is it beneficial to move the house into joint names prior to the sale?

· How does this fit with other financial issues such as maturing investments, pensions, etc.

These are probably areas in which it’s not good to dabble! When you buy an investment property, you talk to ‘experts’ regarding what is or isn’t worth considering. When you sell a property it should be no different - If you exit the market in a planned manner, you’re likely to be far more successful than if you exit quickly because ‘something has come up and I need the cash’! Belvoir works with Franklyn Financial Management, a partner of St James Place Wealth Management, in these areas if you don’t know people yourself. It’s another area that will separate the professional landlord from the novice.

Should I invest in a house or an apartment in Westgate-on-Sea?

I was having a chat with a Landlord the other day who has several properties across the Isle of Thanet and is currently looking at expanding his portfolio. It was clear that he was a bit stuck with what to buy and where to buy it. He had been keen on an apartment in Westgate but he lost out to another buyer as he wasn’t quick enough in deciding if it was going to be the best investment for him. The delay was caused by his opinion that there’s too much of a saturation of apartments in the Westgate area and therefore he should be investing in a house instead. After our brief discussion he left his conundrum with me for the evening in order to do some research and get back to him with the results. This is a brief look at what I found…

The current average rental price of a one bedroom apartment in Westgate is £487 pcm and the current average asking price is £95,538 giving an annual yield of around 6.1% - not bad! Now let’s look at the other option our Landlord’s contemplating. The current average rental price of a 2 bedroom house in Westgate is £686 pcm whilst the average asking price is £173,571, an annual yield of 4.7% - not quite as impressive. It is worth noting the capital growth too, as readers of previous articles will be aware! In Westgate, apartments on average increased in value by 9.6% in the last 12 months, whereas in comparison houses on average increased by 8% in the same timeframe.

Now if we were going on figures alone then the obvious choice of an annual return of 15.7% on an apartment opposed to the 12.7% on a house would be the clear winner. However, it’s not as easy as that and one must also consider a range of variables when it comes to being a buy to let investor, of which there are many and I’ll discuss these in greater detail another time, or if you simply can’t wait then pop in and see me!

Going back to the Landlord’s conundrum about apartment saturation in Westgate; if you gave me 20 apartments, I’d find you 20 tenants, maybe not in one day but certainly within the first month, provided they are priced sensibly so there’s no need to be concerned with voids.

As ever I can’t always fit in all the information I collate during my research so if you would like to know more or would like me to look into buy to let investments for you then please do come and see me. At Belvoir, we don’t sell property so our advice is always free and impartial, our office is on Northdown road in Cliftonville and I look forward to seeing you soon.

Data source - Net house prices - Rightmove HPI - Mouseprice - Zoopla