There are
rumours 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 Solihull 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% (today it is 81.4% in Solihull) by 2032, while the rate of
private sector renting will increase to 35% (interestingly, in Solihull it
stands at 10.3% today). Therefore, the demand for rental accommodation in Solihull
is likely to grow by 1,075 households in the next five years ... and not reduce
as is suggested by the national press.
Solihull 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 Solihull ’20
somethings’.
Currently, 12,018
people live in private rented accommodation in Solihull. This is substantial
number and a sizeable chunk of the electorate. So whilst it appears the Solihull
“Rental Generation” youngsters will continue to rent and to not to buy for the
reasons set out above, Solihull buy-to-let landlords will be lifted by the
projections of greater rental demand. Solihull 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 Solihull (interestingly, I have already been chatting to a few central London landlords
after they read the Solihull Property Blog).
So, by 2021, the
number of rental properties in Solihull will rise to 7,391. This prediction in
growth of the Solihull 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 Solihull. The balance of capital
growth and yield, especially in this low interest rate world we live in, means Solihull
landlords need to do more homework to ensure the investment in property gives
the desired returns.
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