Since the annual rental price inflation in Rotherham peaked at 2.3% 12-18 months ago we have seen increasingly more humble rent increases in our area. In fact, in certain parts of the Rotherham rental market, the rental market saw some slight falls in rents in the last few months. 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 years, it is my opinion Rotherham rents will regain their upward trend and continue to increase because demand for Rotherham rental property will outstrip supply. Why? Read on to find out.
Taxes on landlords reduces the number of rental properties in Rotherham
The only counterbalance to that improved rental growth would be to meaningfully increase rental stock (i.e. the number of rental properties in Rotherham).
However, due to the Government’s new taxes on landlords being introduced between 2017 and 2021, buy-to-let has (and will) be less attractive in the short term for certain types of landlords. This means less new properties will be bought with the sole intention of renting them 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 was that as the new tax rules for landlords started to kick in, landlords would look 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!)
However, in Rotherham my anecdotal evidence suggests the opposite.
Confirmed by my discussions with fellow property, accountancy and banking professionals in our area, it seems that Rotherham landlords are not sell up on masse! Instead, they’re either remortgaging the buy-to-let properties or converting their rental portfolios into limited companies to side step the new taxation rules.
The sentiment of many Rotherham landlords appears to be 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, particularly compared to the unknown mysteries of other popular investment opportunities (such as the stock market and crypto-currency such as BitCoin).
Good news for tenants
Remarkably, there is some good news for tenants! The Conservatives 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 Rotherham?
Taking into consideration all the factors, in my opinion:
Rents in Rotherham over the next 5 years will rise by 8.9%
An 8.9% rise will take the average rent for a Rotherham property from £453 per month to £493 per month.
To put all that into perspective though, rents in Rotherham over the last 12 years have risen by 19.4%.
In fact, that rise won’t be a straight-line growth either, because I have to take into account the national and local Rotherham economy, demand and supply of rental property, interest rates, Brexit and other external factors.
You can see my projections here:
In the past, making money from Rotherham 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 Rotherham property market, as a Rotherham landlord, you are going to need work smarter and have every piece of information, advice and opinion to hand on the Rotherham, regional and national property markets, to enable you to continue to make money…
You’re in the right place for that information – make sure that you follow me on Twitter and Facebook for the latest information. And if you are a landlord and someone looking to sell in South Yorkshire, please get in touch and I’d be glad to assist you.