This update is by economist Chris Worthington, who is a regular PIM speaker.
A recent report by law and tax advice firm CMS entitled The Future of City Living found that it’s not only millennials and students renting property, but workers of all ages and retired people; the report is based on a survey of 6500 people.
56% of the respondents agreed that owning a property was becoming less popular and almost two thirds of respondents said that they would consider renting when they retire, with 55% of over 55s in agreement with that.
Respondents valued superfast internet, smart meters, electric vehicle charging points, keeping pets and local amenities.
The increase in the popularity of renting compared to buying a property is a significant change in the BTL market. How should BTL investors respond?
To keep up with the growing demand for high quality accommodation landlords need to invest in their properties.
Recent statistics published by commercial mortgage lender Interbay Commercial in a report entitled “The Role of Refurbishment in Buy to Let” highlights the monetary value of investment to improve BTL property.
Landlords typically spend about £7000 on a light refurbishment and an average of around £40,000 for a heavy refurbishment.
Landlords can expect an increase in rent of around 8% from a heavy refurbishment, with an average increase in the value of the property value of about 9%.
In the past year, the long term growth of the Private Rental Sector has continued. Mortgage broker Mortgages for Business recently reported that tenant demand increased for eight consecutive months up to August and the number of households renting has increased by 3% since 2016.
With tenant demand on the up and not enough property to satisfy demand (because some small scale landlords have exited the market as result of changes in tax) landlords are benefiting from increased rents.
According to the latest Rental Index published by tenant and landlord insurance company Homelet there was an increase in average annual rents in the UK of 2.4% in the year to August 2019.
Rents increased in all of the UK regions, with the highest increase in the South West at 4.5% and the lowest increase in the North East at 0.8%. The average rent increase in London was higher than the average for the UK at 3.5%.
Martin Totty, Homelet’s Chief Executive commented
“the private rented sector has been resilient, in contrast to the subdued market for property sales.
Landlords are starting to exercise the pricing power they hold thanks to strong demand for rental stock, wage growth and a high level of employment. The ongoing Brexit uncertainty means that more people rent, rather than risk entering the property market at the wrong point in the cycle.“
Our Next Property Meeting
We will all be discussing the latest position on the property market in Bristol and across the UK at our next PIM on Thursday 31 October 2019 at Future Inn, Bristol, BS1 3EN.
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