On several occasions over the
last few months, in my Maidenhead Property Blog, I predicted that the rate of
rental inflation (i.e. how much rents are rising by) had eased over the last
year. At the same time I felt that in some parts of the UK rents had actually
dropped for the first time in over eight years. Recent research backs up this
prediction.
Rents in Maidenhead for new
tenancies fell by 0.4% in the last 12 months (i.e. not existing tenants experiencing rental increases from their
existing landlord). When we compare that current rate with the historical
rental inflation in Maidenhead, an interesting pattern emerges ..
· 2016 - Rental Inflation in Maidenhead was 5.1%
· 2015 - Rental Inflation in Maidenhead was 9.4%
· 2014 - Rental Inflation in Maidenhead was 3.2%
The reason behind this change depends
on which side of the demand/supply equation you are looking from. On the demand
side (from the tenants point of view)
there is the uncertainty of Brexit and the fact that salaries are not keeping
up with inflation for the first time in three years. Critically this means
tenants have less disposable income to pay their rent. As an aside, it is
interesting to note that nationally, rent accounts for 29% of a tenant’s take
home pay (Denton House).
On the supply side of the
equation (landlords point of view) Brexit
also creates uncertainty. However, the biggest issue was a massive upsurge of
new rental properties coming on to the market in late 2016, caused by George
Osborne’s new 3% stamp duty tax for landlords in the first part of 2016. This
meant a lot of new rental properties were ‘dropped’ on to the rental market all
at the same time. The greater choice of rental properties for tenants curtailed
rental growth/inflation. A slight softening of Maidenhead property prices has
compounded this. Figures from The Bank
of England suggested that first time buyers rose over the last 12 months as
some were more inclined to buy instead of rent. Together, these factors played
a part in the ongoing moderation of rental growth.
The lead up to the General
Election in May didn’t help: after all people don’t like doubt and uncertainty.
So now that we have a mandate for going forward over the next 5 years hopefully
that has removed any stumbling blocks stopping tenants making the decision to
move home.
Whether it be ‘hard’ or ‘soft’ Brexit
negotiations (and with the Election result the Tory’s might have to be ‘softer’
on those negotiations) the simple fact is, we aren’t building enough properties
for us to live in. Both in Maidenhead, the South East and the wider UK, long-term
population trends imply that rents will soon be growing faster than inflation again.
Look at the projections by the Office of National Statistics.
Population Estimates for Windsor and Maidenhead Borough Council over
the next 20 years
|
||||
2016
(actual)
|
2021
|
2026
|
2031
|
2036
|
149,409
|
154,610
|
159,259
|
163,051
|
167,043
|
Tenants will still require a vibrant and growing rental sector to deliver them housing options in a timely manner. As the population grows in Maidenhead, and wider afield, any restriction to the supply of rental properties (brought about by poor returns for landlords) cannot be in the long-term best interest of tenants. Simply put rents must go up!
The fact is that
I see this as a short-term blip and rents will continue to grow in the coming
years. With rents only accounting for 29% of a tenants’ disposable income, the
ability for most tenants to absorb a rent increase does exist.
