Quite often, when talking about the rental market, we talk about property and seem to forget the other party in the equation, the tenant. Without tenants, there is no demand for the rental property. The profile of the Cheltenham and Gloucester tenant has changed and continues to change. Although this is in part due to the credit crunch, job mobility and the raising of deposits, an increased number of people in their twenties are choosing to rent rather than buy and have done so, even when they were in a position when they could have bought a property.
Since the credit crunch, rents have been good value for money for most tenants outside London. Few rents (outside London) have kept pace with inflation as they tend to track wage inflation. In 2008, the average median gross wage according to Office of National Statistics in Gloucester was £22,107 whilst in Cheltenham it was £26,055. Latest figures for Gloucester in 2014 show average salaries in the City have risen to £24,782 a rise of 12.1% whilst in Cheltenham, the same survey shows that average salaries are now £29,703 an increase of 14%. Recent research results from the Bank of England with regards to inflation, goods and services that cost £100 in 2008 would cost £119 in 2014, making inflation 19% over those seven years.
Cheltenham and Gloucester tenants are paying less than both wages and goods inflation. Cheltenham and Gloucester rents are in fact still only around 4.5% above the level being achieved in 2008 but the tenants are being paid between 12.1% and 14% more. That is why we have seen a greater demand for Cheltenham and Gloucester rental properties with more and more people becoming tenants. So renting has since the credit crunch, on average, delivered good value for money for tenants and hence the healthy demand and lack of void periods for most property.
Overall, considering the recent rises in property prices over the last 12 months, we are between 2% to 3% above the 2007 boom prices in Cheltenham and Gloucester. With reasonable rents, many would-be first time buyers in Cheltenham and Gloucester have been wise to remain in the private rental sector. Rents tend to move in line with wages as opposed to inflation and if something goes wrong with the property, inevitably landlords pick up the bill, so tenants aren’t hit with awful expenditure surprises as a normal homeowner would be. In addition, renting offers better mobility both from a location perspective, but also from a trading up or down perspective in terms of rent commitment which, in this tough job market, could be considered a wise move.
From the landlords point of view, the consequence of this steady / solid market throughout the Cheltenham and Gloucester area, with good tenant demand, decent long term capital growth (as mentioned in last week's article) and average yields of around 3.8% to 4.5% with home owners it used to be buy, sell, buy, sell as one rose up the property ladder.. Now it’s buy, hold, buy, hold.
If you would like to discuss my thoughts on the rental markets in Cheltenham or Gloucester, feel free to pop into either of our offices in Cheltenham or Gloucester or email me on neil.west@belvoir.co.uk
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