With
the Government preparing to control tenant’s deposits at five weeks
rent, Southampton landlords will soon only be protected in the event of a
single month of unpaid rental-arrears, at a time when Universal Credit has seen
some rent arrears quadrupling and that’s before you consider damage to the
property or solicitor costs.
It
can’t be disputed that the deposits Southampton tenants have to save for,
certainly raises the cost of renting, putting another nail in the coffin of the
dream of home ownership for many Southampton renters whilst at the same time,
those same deposits being unable to provide Southampton landlords with a decent
level of protection against unpaid rent or damage to the property.
In fact, the total of all the tenants’
deposits in
Southampton, deposited or protected,
is £32,669,618
When
you consider the value of all the privately rented properties in Southampton
total £7,418,376,504, the need for decent landlord insurance to ensure you are
adequately covered as a Southampton landlord is vital.
However,
I want to consider the point of view of the Southampton tenant. Several housing charities believe spending
more than a third of someone’s salary on rent as exorbitant, yet for
the tenants they find themselves in that very position. I feel especially sorry for the Southampton
youngsters in their 20’s who want to rent a
place for themselves, as they face having to pay out the rent and try and save
for a deposit for a home.
40 years ago, British people who rented spent an average of 10% of
their salary on rent, and only 14% in London.
Looking in even greater detail, according to the ONS, over the past 60 years
the proportion of total spending on all housing (renting and mortgages) has
doubled from 9% in the late 1950’s to 18% today. Whilst on the other hand, the proportion of
total expenditure on food has halved (33% to 16%), as has the proportion of
total spending on clothing (10% to 5%) ... it’s a case of swings and
roundabouts!
Yet landlords
also face costs that need to be covered from rents including mortgages, landlord
insurance (especially the need for the often-inadequate deposits to cover the
loss of rent and damage), maintenance and licensing. In fact, rents in the last 10 years have
failed to keep up with UK inflation, so in real terms, landlords are worse off
when it comes to their rental returns (although they have gained on the
increase in Southampton property values – but that is only realised when a property
sells).
There are a small handful of Southampton
landlords selling some/or all of their rental portfolio as their portfolios become
less economically viable with the recent tax changes for buy to let landlords, which
will result in fewer properties available to rent.
However, this will reduce the
supply and availability of Southampton rental properties, meaning rents will
rise (classic textbook supply and demand), thus landlords return and yields
will rise. Yet, because tenants still
can’t afford to save the deposit for a home (as we discussed above) and we are
all living longer, the demand for rental properties across Southampton will continue
to grow in the next twenty to thirty years as we turn to more European ways where
the norm is to rent rather than buy in the 20’s and 30’s age range. This will
mean new buy-to-let landlords will be attracted into the market, buy properties
for the rental market in Southampton and enjoy those higher yields and returns
… isn’t it interesting that things mostly always go full circle?
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@belvoir.co.uk or call on 023 8001 8222.
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