Falkirk’s ‘Generation Rent’ to grow by 15,700 households by 2021

“The growth of the private rented sector, and the arrival of an investor class of buy to let landlords within it, is an issue that won’t be going away anytime soon… no matter what you read in the Daily Mail.” I said, as I chatted over a coffee with a landlord client of mine in the town. Whether you are a landlord of mine (or not, as the case maybe), I am always happy to look over any properties you are thinking of buying for buy to let purposes – and more so over a coffee!

Some commentators are saying buy to let is about to die.

With the new Land & Buildings Transaction Tax (LBTT) changes and how mortgage tax relief will be calculated, some are saying that 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 Falkirk is only going in one direction – and not the direction the papers say they are going.

Facts and Figures

According to Sheffield University (a centre of excellence on the topic), buy to let landlords will continue fuelling the growth of the private rented sector in the coming decades.

By their estimates, the rate of homeownership nationally will fall to 50% by 2032. Today it is 64.7.0% in Falkirk. Meanwhile, the rate of private sector renting will increase to 35%. Interestingly, in Falkirk it currently stands at 7.3%.

Therefore, the demand for rental accommodation in Falkirk will grow by 15,700 households in the next five years. These are the reasons why, irrespective of the distractions set out in the newspapers.

 Generation Rent

Over the last six years, Falkirk’s property values have risen a lot more than average wages/salaries. As homeownership and mortgage availability is dependent on your ability to pay a deposit, this 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 Government’s efforts to fix the deficiency of affordable housing have focused on those who want to buy a home – ranging from Help to Buy to the much vaunted Help to Buy Isa. But if you are unable to save for the deposit, none of this means anything. Especially to the ‘20 somethings’ of Falkirk and they still need a roof over their heads!

What is the effect on Falkirk Landlords?

These are big numbers and a sizeable chunk of the electorate. So, whilst it appears Falkirk “Generation Rent” youngsters will continue to rent and to not to buy, Falkirk buy to let landlords will be lifted by the projections of greater rental demand. Falkirk and the area around it still offers the prospect of strong economic growth forecasts and has a reputation as a lively and desirable place to live.

With the new rules on tax, more and more landlords will be looking to move away from the previous ‘honey pot’ of central Edinburgh, because its higher prices mean lower rental yields.

With the new tax rules and central Edinburgh’s cooling of house price inflation, more and more landlords will look further afield, including Falkirk (interestingly, I have already been chatting to a number of central Edinburgh landlords after reading the Falkirk Property Blog).

This prediction in growth of the Falkirk rental market is even on the back of the government clamping down on tax relief 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 Falkirk. In order to balance capital growth and yield, especially in this low interest rate world we live in, Falkirk landlords will need to do more homework to ensure investment in property gives the desired returns.

One place for Falkirk landlords and homeowners to visit for such information is the Falkirk Property Blog.

As always, if you are an investor in the Falkirk property market and would like a second opinion on a property you have seen then send the URL of the properties you have seen online over to me. Or if you would like to pop in and have a chat, then you can either email me on news@thekeyplace.co.uk or call on 0324 469840. Our address is 6 Vicar Street, Falkirk (just opposite the Clydesale Bank). The kettle is always on and we will even pull out the posh biscuits!

www.thekeyplace.co.uk

14% of Falkirk Homes Are Three People Households

I was having an interesting chat with a Falkirk buy to let landlord the other day when the subject of size of households came up in conversation.  For those of you who have read my articles about life after the Brexit vote, one of the reasons on why I thought the Falkirk property market would, in the medium to long term, be OK, was the fact that the size of households in the 21st Century was getting smaller – which would create demand for Falkirk Property and therefore keep property prices from dropping.

Looking at the stats going back to the early 1960’s, when the average number of people in a home was exactly 3, over the years it has steadily dropped by a fifth to today’s figure of 2.4 people per household. Doesn’t sound a lot, but if the population remained at the same level for the next 50 years and we had the same 20% drop in household size, the UK would need to build an additional 5.28 million properties (or 105,769 per year) .  When you consider the Country is only building 139,800 properties a year. It doesn’t leave much for people living longer and immigration, looking closer to home.

In Falkirk, the average number of occupants per household is 2.1 people which is less than the national average of 2.4 people.

When we look at the current picture nationally and split it down into tenure types (i.e. owned, council houses and private renting, a fascinating picture appears.

The vast majority of homeowners who don’t have a mortgage are occupied by one or two people (81% in fact), although this can be explained as residents being older, with some members of the family having moved out, or a pensioner living alone. People living on their own are more likely to live in a Council house (43%) and the largest households (those with 4 or more people living in them) are homeowners with a mortgage – but again, that can be explained as homeowners with families tend to need a mortgage to buy. What surprised me was the even spread of private rented households and how that sector of population are so evenly spread across the occupant range – in fact that sector is the closest to the national average, even though they only represent a sixth of the population.

When we look Falkirk figures for all tenures (Owned, Council and Private Rented) a slightly different picture appears...

But it gets even more interesting when we focus on just private rental properties in Falkirk, as it is the rental market in Falkirk that really fascinates me. When I analysed those Falkirk private rental household composition figures, a slightly different picture appears as around:

• 38% of Private Rental Properties are 1 person households
• 51% of Private Rental Properties are 2 person households
• 7% of Private Rental Properties are 3 person households
• 3% of Private Rental Properties are 4 person households
• 1% of Private Rental Properties are 5+ person households

As you can see, Falkirk is a bit different from the national picture as it has more 1 person households and less 3 and 4 bedroom households and the position with 3 and 4 bedroom households is more extreme in the rental sector. If you are considering future buy to let purchases in the coming 12 to 18 months, I would seriously consider looking at 3 bed properties. Even with the numbers stated, there are simply not enough 3 bed properties to meet the demand. They have to be in the right part of Falkirk and priced realistically, but they will always let and when you need to sell, irrespective of market conditions at the time, will always be the target of buyers.

To keep up-to-date with the rented property sector in Falkirk, visit my property blog by clicking here .

www.thekeyplace.co.uk