My thoughts to the landlords and homeowners of Letchworth…
The tightrope of being a Letchworth buy-to-let landlord is a balancing act many do well at. Talking to several Letchworth landlords, they are very conscious of their tenants’ capacity and ability to pay the rent and their own need to raise rents on their rental properties (as Government figure shows ‘real pay’ has dropped 1% in the last six months). Evidence does suggest many landlords feel more assured than they were in the spring about pursuing higher rents on their properties.
During the summer months, historic evidence suggests that the rents new tenants have had to pay on move in have increased. June/July/August is a time when renters like to move, demand surges and the normal supply and demand seesaw mean tenants are normally prepared to pay more to secure the property they want to live in, in the place they want to be. This is particularly good news for Letchworth landlords as average Letchworth rents have been on a downward trend recently. So look at the figures here…
Rents in Letchworth on average for new tenants moving in have risen 1.5% for the month, taking overall annual Letchworth rents 1.6% higher for the year
However, several Letchworth landlords have expressed their apprehensions about a slowing of the housing market in Letchworth. I think we may well see some adjustment in rental values, but this is not a cause to exaggerate negativity.
Before we get the Champagne out, the other side of the coin to property investing is capital values (which will also be of interest to all the homeowners in Letchworth as well as the Letchworth buy-to-let landlords). I believe the Letchworth property market has been trying to find some level of equilibrium since the New Year. According to the Land Registry…
Property Values in Letchworth are 3.2% higher than they were 12 months ago, rising by 0.14% last month alone!
Yet, I would take those figures with a pinch of salt as they reflect the sales of Letchworth properties that took place in early Spring 2017 and now are only exchanging and completing during the summer months.
The reality is the number of properties that are on the market in Letchworth today has risen by 21.31% since the New Year and that will have a dampening effect on property values. As tenants have had less choice, buyers now have more choice and that will temper Letchworth property prices as we head towards 2018.
Be you a homeowner or landlord, if you are planning to sell your Letchworth property in the short term, it is crucial, especially with the rise in the number of properties on the market, that you realistically price your property when you bring it to the market. With the increase in choice of properties, the balance of power during negotiation generally sways towards the buyer. Given that everyone now has access to property details, including historic stats for how much property have sold for, they will be more astute during the offer and negotiation stages of a purchase.
However, even with this uplift in the number of properties for sale in Letchworth, property prices will remain stable and strong in the medium to long term. This is because the number of properties on the market today is still way below the peak of summer of 2008, when there were 830 properties for sale compared to the current level of 222 (if you recall, prices dropped by nearly 20% in Credit Crunch years of ‘08 and ‘09).
Compared to 2008, today’s lower supply of Letchworth properties for sale will keep prices relatively high…and they will continue to stay at these levels for the medium to long term.
Less people are moving than a few years ago, meaning less property is for sale. Fewer properties for sale mean property prices remain relatively high and this is because of a number of underlying reasons. Firstly, buy-to-let landlords tend not sell their properties as often as owner-occupiers, consequently removing the property out of the housing market selling cycle. Secondly, Stamp Duty is much higher compared to 10 years ago (meaning it costs more to move). Next, there is a dearth of local authority rental housing so demand for private rented housing will remain high. Then we have the UK’s maturing owner occupier population, meaning these older people are less likely to move (compared to when they were younger). Another reason is the lack of new homes being built in the country (we need 240k houses a year to be built in the UK and we are currently only building 145k a year!) and finally, the new mortgage rules introduced in 2014 about how much a person can borrow on a mortgage has curtailed demand.
Some final thought’s before I go – to all the Letchworth homeowners that aren’t planning to sell – this talk of price changes is only on paper profit or loss. To those that are moving most people that sell, are buyers as well, so as you might not get as much for yours, the one you will want to buy won’t be as much, (swings and roundabouts as Mum used to say!)
To all the Letchworth landlords – keep your eyes peeled – I have a feeling there may be some decent buy-to-let deals to be had in the coming months. One place for such deals, irrespective of which agent is selling it, is my Letchworth Property Blog http://www.letchworthpropertyblog.co.uk