“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!
No comments:
Post a Comment