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 Gloucester 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 home ownership nationally will
fall to 50% (today it is 69.1% in Gloucester) by 2032, while the rate of
private sector renting will increase to 35% (interestingly, in Gloucester it
stands at 16.8% today).
Therefore, the demand
for rental accommodation in Gloucester will grow by 1,949 households in the
next five years ... and these are the reasons why, irrespective of the
distractions set out in the newspapers
Gloucester 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 governments 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
Gloucester ... and they still need a roof over their heads!
Currently, over 20,000 people live in private rented
accommodation in Gloucester
These are big numbers and a sizeable chunk
of the electorate. So whilst it appears Gloucester “Generation Rent” youngsters
will continue to rent and to not to buy for the reasons set out above,
Gloucester buy-to-let landlords will be lifted by the projections of greater
rental demand. Gloucester and the area around it still offers the prospect of
strong economic growth forecasts and is a 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 Gloucester.
So, by 2021, the number of rental
properties in Gloucester will rise to 13,406
This prediction in growth of the
Gloucester 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
Gloucester. The balance of capital growth and yield, especially in this low
interest rate world we live in, means Gloucester landlords need to do more
homework to ensure the investment in property gives the desired returns.
No comments:
Post a Comment