I was having an interesting chat the other day with a couple
of solicitors at a Royal Tunbridge Wells business networking event, when the
subject of a lack of property for first time buyers came into the
conversation. I followed the chat up
with an email with my findings, findings that I would like to share with you
today.
At the time of the last census in 2011, 3,401,675 properties
in England were privately rented, of which it is estimated, over 1.25 million were owned by private
landlords. The rapid growth of buy-to-let is hugely controversial, especially
as only ten years before that, there were only 1,798,864 properties under
private renting in England. Buy to let landlords have been held responsible for
forcing up property prices and preventing our younger generations from being
able to buy. There is also growing resentment toward the billions of pounds in
tax relief (estimated to be nearly £10 billion) landlords claim on their
mortgage interest -tax relief which is not available to homeowners.
They may be asset rich thanks to recently rising property
values, but let us not make the landlords the bogiemen they could easily be. Despite
all these benefits enjoyed by private landlords, let us not forget the good
they have done, especially in Royal Tunbridge Wells.
Property values today in Royal Tunbridge Wells are still 3.2%
above the 2007 property boom levels (2007 being the peak of last property boom
before everything dropped in 2008/9), yet inflation has risen by 26% in the
same time frame, so in real terms, properties today are 22.8% CHEAPER than they
were in 2007. Just think how low they would be without landlords buying all
those rental properties in the city. Interest rates are at an all time low and first
time buyers only need to save a £12,500 deposit to secure a lovely 2 bed semi
in the Blackthorn Avenue area with a 95% mortgage. Forget what the papers say,
first time buyers can borrow money relatively easily on a 95% mortgage and nine
times out of ten, it’s cheaper to buy than rent.
So why aren’t people buying?
The number of people choosing to rent, either for lifestyle
or economic reasons, has grown over the last 15 years. I also believe they will
continue to grow for some time to come (as does every report on the subject).
In fact I would go as far to predict the number of rental properties in Royal
Tunbridge Wells will have risen from the 7,412 properties recorded in 2011 to 9,800
by 2021. Sounds fanciful?
Well in 2001, there were only 4,092 privately rented
properties in Royal Tunbridge Wells.
It is a fact that we as a Country are more and more turning
into a European model when it comes to homeownership, where the norm is renting
for the first ten years, as opposed to the norm from the 1960’s to 1990’s,
where first time buyers were encouraged to buy as soon as they got a job.
Tenants, in particular, will also feel the benefit from potential
changes in the market. The likelihood of interest rate increases in late 2015,
existing economic conditions, combined with the uncertainty of new Government
manifestos following the General Election in May will result in low demand for
people to buy yet also put a dampening effect on increases in rent. As long as landlords
buy the right sort of property, that allows for a reasonable yield, decent capital
growth, everyone will be a winner.
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