Since then we have seen increasingly more humble rent increases. In fact, in certain parts the Stamford rental market saw some slight falls in rents over the autumn.
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 few years it is my opinion that rents will regain their upward trend and continue to increase as demand for Stamford rental property will outstrip supply, and this is why.
The only counterbalance to that improved rental growth would be to meaningfully increase rental stock (i.e. the number of rental properties in Stamford). However, because of the government’s new taxes on landlords being introduced between 2017 and 2021, that means buy-to-let has (and will) be less attractive in the short term for certain types of landlords (meaning less new properties will be bought to let 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 being as the new tax rules for landlords started to kick in, landlords would look to vacate their tenants, sell up and invest their capital elsewhere. Although ironically that would lower supply of rental properties, decreasing the supply, meaning rents would increase again!
Anecdotal evidence suggests (and confirmed by my discussions with fellow property, accountancy and banking professionals in the area), that Stamford landlords are (instead of selling up en-masse), actually either
(i) re-mortgaging their buy-to-let properties instead or
(ii) converting their rental portfolios into limited companies to side-step the new taxation rules.
The sentiment of many local landlords is 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 – compared to the ‘voodoo magic’ of the stock market and other exotic investment vehicles like debentures and crypto-currency (e.g. BitCoin).
Remarkably, there is some good news for tenants, as the Tories recently published the draft ‘Tenants’ Fee Bill’, which is designed to prohibit the charging of tenants lettings fees on set up of their 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.
So, how will this impact on our local landlords and tenants?
In my considered opinion, rents in Stamford over the next 5 years will rise by 9.9%, taking the average rent for a Stamford property from £926 per month to £1,017 per month.
To put all that into perspective though, rents in Stamford over the last 12 years have risen by 18.7%. In fact, that rise won’t be a straight-line growth either, because I have to take into account the national and local Stamford economy, demand and supply of rental property, interest rates, Brexit and other external factors.
Please see the following graph for my projections:
In the past, making money from 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 Stamford and Rutland property market, as a local landlord, you are going to need work smarter and have every piece of information, advice and opinion to hand on the local, regional and national property markets, to enable you to continue to make money.
If you have any questions regarding property investment, please call me I am happy to help you.
David Crooke
MD & Owner, 01780 484 554
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