Nottingham’s ‘Rental Generation’ to grow by 5,841 households by 2021

There are rumors that the buy to let market is about to die, with the new stamp duty changes and how mortgage tax relief will be calculated. I have heard it mentioned 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’? I would like to explain why buy to let market in Nottingham is only going in one direction – and that’s 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 homeownership nationally will fall to 50% by 2032, while the rate of private sector renting will increase to 35% (interestingly, in Nottingham it stands at 24% today). Therefore, the demand for rental accommodation in Nottingham is likely to grow by 5,841 households in the next five years ... and not reduce as is suggested by the national press.

         

Nottingham property values over the last six years have risen far more on average than wages/salaries.  This has meant as homeownership and mortgage availability is dependent on the ability to pay, that home ownership has further been pushed out of reach for many, at the same time as the stock of council houses has 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 is true the Tory’s 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 boasted about help to buy Isa, and starter home 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, this will probably include most Nottingham ’20 somethings’.

Currently, 72,036 people live in private rented accommodation in Nottingham. This is substantial number and a sizeable chunk of the electorate. So whilst it appears the Nottingham “Rental Generation” youngsters will continue to rent and to not to buy for the reasons set out above, Nottingham buy-to-let landlords will be lifted by the projections of greater rental demand. Nottingham and the area around it still offers the prospect of strong economic growth forecasts and has a reputation as a lively and highly desirable place to live. With the new rules on tax, more and more landlords will be looking to move away from the previous honeypot of central London, its higher prices mean 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 Nottingham.

So, by 2021, the number of rental properties in Nottingham l will rise to 40,174. This prediction in growth of the Nottingham rental market is even on the back of the government clamping down on tax reliefs for landlords. 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 so much now. You must take a more considered approach to your existing and future portfolio, especially in Nottingham. The balance of capital growth and yield, especially in this low interest rate world we live in, means Nottingham landlords need to do more homework to ensure the investment in property gives the desired returns. For information and tips on the Nottingham property market email me on Jaclyn.bartlett@centrickproperty.co.uk

Private Renting in Nottingham increases by 835% in 20 years

You find me in a reflective mood today, as I would like to talk about the future of investing in property in Nottingham. The truth is that we have become lethargic, with many people having mistaken the ever rising Nottingham (and for that matter, the whole of the UK) property market as the eternal gift that kept giving since the 1960’s, as property prices constantly rose and doubled every five to seven years. Whilst George Osborne has decided that now is the time to milk the ‘Golden Cow’ of UK’s private landlords, with changes in taxation for buy to let property, many pundits are predicting the end of buy to let as we know it. However, it is still possible to make a reasonable, profitable and safe return on property with these changes. I have always seen investing in the buy to let market as one might view Mother Nature. It has the capacity to create truly wonderful warm weather and balmy summer climates, yet still holds the potential to unleash catastrophic storms and hurricanes in the blink of an eye. You need to take the time to study the market, obtain advice and opinions from knowledgeable people and then decide what the proverbial property weather forecast will be… remember, tenants will always need a roof over their head and I don’t see the government building the millions of houses required to house them.

Nobody knows the future, and while people may predict what is yet to happen, I wouldn't be afraid of this change … because as the French proverb says (or Jon Bon Jovi sang…), ‘The more things change, the more they stay the same’. No one could have predicted how the property market has changed in Nottingham over the last couple of decades. Twenty years ago, in 1995, 18,619 households (meaning 47.61% of property) were owned and only 1,238 households were privately rented (meaning 3.17% of property was rented out by private landlords). Roll the clocks on to 2016 and 16,820 of properties in the city are owner-occupied (a slight drop to only 39.98%) and the jump in private renting has been out of this world, as 12,479 properties are now privately rented (29.66% proportionally) with neighboring cities showing similar changes. Who would have predicted in 1995 that the private rental sector in Nottingham would have grown by 835% over the proceeding 20 years?

Also, if you had asked someone in 1995 to predict what would happen to property values over the next 20 years, they might have predicted similar growth to that experienced over the previous 20 years (between 1975 and 1995), which was a very impressive 351.55%. Yes, property values have of course increased in Nottingham between 1995 and 2015 but by a more modest 88.82% (and most of that can be attributed to house price growth between 2000 and 2006.)

The property market is constantly evolving and the buy to let market has for too long been solely and heavily dependent on house price growth, whilst yield has been almost forgotten. I see the changes in taxes, landlord and tenant law as opportunities, contrary to the doom-mongers out there. You may need to change your benchmarks, your approach to financing, or even consider different types of property in which to invest your money, but this will shine a light on investing in properties with healthier yields and will create more realistic long term buy to let opportunities, instead of relying on short term growth bets and wagers.

The advice I give to my landlords is this: these changes will panic or scare some landlords, but this also means that competition for decent Nottingham buy to let bargains will reduce, as fear of change kicks in and amateur investors choose alternative investments. These opportunities will provide a more stable platform for knowledgeable and experienced Nottingham landlords to thrive. If you would like to learn more about the Nottingham Property Market, feel free to pop into our property lounge for a drink and chat with me. 

39.6% of Nottingham tenants in the private rented sector are on Housing Benefits...

What does the ideal Nottingham tenant look like?”, asked one of my landlords from Mapperley the other day, to which he carried on before I could reply, “Let me guess, a professional couple, both in their 30’s, flawlessly tidy, pays their rent early, doesn’t complain or fuss, who has no plans to move and cheerfully accepts annual rent rises”.

Before I can answer that question properly, I have always believed all a landlord wants (and expects) of their tenants is to pay their rent on time and look after the property as if it were their own. In return, the landlord should provide a property that is warm, clean, modern and damp free and sort any issues (such as repairs) quickly and without fuss.

Back to the tenants who tend to fall into several groups ... 20 something professionals; young and middle aged families; corporate tenants (ie their employer finds their employee a house to live in); students; older singles / couples; and housing benefit claimants - and they all come with different needs and wants. So choosing who best suits your Nottingham property and steering clear of bad tenants is a big factor in making property investment a success.

One topic that I am often asked is should they, as a landlord, accept tenants on housing benefit? It might interest the landlords of Nottingham that of the 27,300 private rented properties in the local council area, 39.6% of the tenants of those properties are on some form of housing benefit. (10,811 properties to be exact). I know many landlords have suffered late rent payments with tenants on housing benefits, especially since 2008, when local authorities started paying housing benefit to tenants rather than directly to the landlords, but you can’t ignore the fact that housing benefit tenants make up a significant proportion of the Nottingham rental population. My opinion is that the final choice of accepting such tenants has to be the landlords but you can’t tar every tenant with the same brush (I will always give you a balanced opinion if ever asked).

Interestingly, it might surprise some readers of the Property articles, when we compare Nottingham to the national picture, Nottingham’s Housing benefit claimants are higher, as nationally a lower proportion of private tenants claim the benefit. Nationally, 39.2% of the tenants of the 3,891,467 rental properties in Great Britain claim some form of housing benefit (ie 1,526,915 properties).

Now, let us look at the occupations of Nottingham’s tenants, which makes even more fascinating reading. Of the 27,300 privately rented properties in the Nottingham area, 18,271,918 head tenants (the head tenant being classified as the head of the household) are in employment (the other 9,029 rental property head tenants either being retired, long term sick, students or job seekers).

Splitting those 18,271 head tenants down into their relevant professions, 7,240 of them are Managers, Directors, Senior Officials, Professional or Technical Professions, 1,520 in Administrative and secretarial occupations, 1,477 in Skilled Trades, 1,527 in the Caring, Leisure and other service occupations, 2,084 Sales and Customer Service Occupations, 1,246 Process, Plant and Machine Operatives and finally, 3,177 in Elementary Occupations.

The one thing I have always known anecdotally, but until I did my research, never had anything to back it up with, was the high proportion of professionals and skilled trades renting property in Nottingham - intriguing! Maybe in future articles, I will look deeper into the corporate tenant market, young and middle aged families, students and older person’s rental markets.... but in the meantime, if you want more news and views about the Nottingham property market, please email on Jaclyn.bartlett@centrickproperty.co.uk