It’s now been a good 12/18 months since annual
rental price inflation in Southampton peaked at 3.4%. Since then we have seen
increasingly more humble rent increases. In fact, in certain parts of the Southampton
rental market over the autumn, the rental market saw some slight falls in
rents. So, could this be the earliest indication that the trend of high rent
increases seen over the last few years, may now be starting to buck that trend?
Well, possibly in the short term, but in the coming
few years, it is my opinion Southampton rents will regain their upward trend
and continue to increase as demand for Southampton rental property will outstrip
supply, and this is why.
The only counterbalance to that improved rental growth
would be to meaningfully increase rental stock (i.e. the number of rental
properties in Southampton). However, because of the Government’s new taxes on
landlords being introduced between 2017 and 2021, that means buy-to-let has
(and will) be less attractive in the short term for certain types of landlords
(meaning less new properties will be bought to let out).
Interestingly, countless market experts assumed at
the start of 2017, that the number of rental properties would in fact drop throughout
the year. The assumption being as the new tax rules for landlords started to
kick in, landlords looked to kick their tenants out, sell up and invest their capital
elsewhere. (Although ironically that would lower supply of rental properties,
decreasing the supply, meaning rents would increase again!).
Anecdotal evidence suggests, confirmed by my
discussions with fellow property, accountancy and banking professionals in Southampton,
that Southampton landlords are (instead
of selling up on masse), actually either (1) re-mortgaging their Southampton
buy-to-let properties instead or (2) converting their rental portfolios into limited
companies to side step the new taxation rules.
The sentiment of many Southampton landlords is that
property has always weathered the many stock market crashes and runs in the
last 50 years. There is something inheritably understandable about bricks and
mortar – compared to the voodoo magic of the stock market and other exotic investment
vehicles like debentures and crypto-currency (e.g. BitCoin).
Remarkably, there is some good news for tenants, as
Tory’s recently published the draft
Tenants’ Fee Bill, which is designed to prohibit the charging of tenants
lettings fees on set up of the tenancy. However, looking at evidence in
Scotland, I expect rents to rise to compensate landlords, thus hammering
faithful tenants looking for long-term tenancy agreements the hardest. This
growth will be on top of any usual organic rent growth. It really is swings and roundabouts!
So, what does this all mean for landlords and
tenants in Southampton? In my considered opinion,
Rents
in Southampton over the next 5 years will rise by 9.2%, taking the average rent
for a Southampton property from £1,422 per month to £1,553 per month.
To put all that into perspective though, rents in Southampton
over the last 12 years have risen by 21.5%. In fact, that rise won’t be a
straight-line growth either, because I have to take into account the national
and local Southampton economy, demand and supply of rental property, interest
rates, Brexit and other external factors. Please see the graph
for my projections
In the past, making money from Southampton buy-to-let
property was as easy as falling off a log. But with these new tax rules, new
rental regulations and the overall changing dynamics of the Southampton
property market, as a Southampton landlord, you are going to need to work smarter and have every piece of information, advice and
opinion to hand on the Southampton, Regional and National property market’s, to
enable you to continue to make money.
If you are looking for an agent that is well established, professional andcommunicative, then contact us to find out how we can get the best out of your investment property.
Email me on brian.linehan@belvoirlettings.com or call on 023 8001 8222.
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Twitter, https://twitter.com/sotonbelvoir
LinkedIn, https://www.linkedin.com/in/brianlinehan
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