Royal Tunbridge Wells Rents Smash Through the £1,500 Barrier

Are Tunbridge Wells Landlords Profiteering?

The private rented sector for both Tunbridge Wells landlords and Tunbridge Wells tenants is facing immense challenges, with a shortage of available homes for rent putting renters under significant pressure. 

And you can see why when the average UK rent in 2021 was £1,381 and in 2023 it has been £1,706, an increase of 23.53%.

Let’s look closer to home in the Tunbridge Wells area.

The average rent for homes coming on the market in the Tunbridge Wells area in 2021 was £1,348 per month, whilst in 2023, it has been £1,503 per month.

(Tunbridge Wells area TN1 to TN4).

You can see why people are accusing landlords of "widespread profiteering".

But as always, the devil is in the detail.

This increase in average Tunbridge Wells rent is for new tenancies,

not tenancy renewals.

A new tenancy is when a brand-new tenant moves into a home, whilst a renewal is when an existing tenant renews the lease with their existing landlord.

Government data shows that most landlords are not exploiting the mortgage crisis, with 64% of landlords maintaining and 4% decreasing rents to shield renters from the impact on renewal of their tenancy agreement, dispelling the notion that they are exploiting the situation.

Looking at the same Government data, of the landlords setting rents for new tenants, just under half of landlords (45%) stated they increased the rent compared to the previous tenancy with the old tenant, whereas a third (35%) kept the rent they charged at the same level, and surprisingly 1 in 12 (8%) decreased the rent.

Therefore, whilst the average percentage growth in Tunbridge Wells for new tenancies is 11.5%, the overall average for all tenancies is only 4.4% for Tunbridge Wells.

And 4.4% is much lower than the rate of inflation. 

Contrary to popular belief, landlords' profit margins have significantly dwindled in recent years. The profits for private landlords are at their lowest since the Credit Crunch due to rising mortgage rates and limited tax relief. This demonstrates that private landlords are not profiteering during the cost-of-living crisis. 

Now some of you will say, Tunbridge Wells house prices have risen in that time. Yes, that is the case, yet not by the rate of inflation, so in fact in ‘real’ terms, their investments have gone down in value.

Landlords are often portrayed negatively in the media but are in fact making considerable efforts to provide safe and secure housing for millions of tenants.

Landlords face growing costs, including increased mortgage payments and the negative impact of a tax system that discourages investment in the rental market. These challenges are further exacerbated by ongoing uncertainty surrounding reforms to the law regarding landlords. 

With limited options available, landlords must choose between leaving the private rented sector, increasing rents as a last resort, or absorbing mounting costs. However, the latter is nearly impossible for most individual landlords who lack deep pockets. To address these challenges, the Government must provide crucial support to the rental market.

To alleviate the burden on renters, the Government should reconsider current taxes which are designed to discourage landlords from providing more rental homes. It is vital to ensure that the supply of rental properties does not further diminish, as Tunbridge Wells tenants simply cannot bear the consequences of a dwindling market and it will lead to further housing hardship.

Without proper government support, both renters and landlords will continue to face challenges, caught between a rock and a hard place.

Housing is such an important thing (rather like the NHS), and I would urge all parties, to move beyond rhetoric and take positive action to support the private rented sector. 

I know many Tunbridge Wells landlords who are making sincere efforts to shield Tunbridge Wells renters from the mortgage crisis, and it is crucial their contributions are recognised.

By fostering an environment that encourages investment and providing support to renters, the Government can help alleviate the strain on both landlords and tenants and ensure a sustainable and fair rental market for all.

These are my thoughts, what are yours?

Royal Tunbridge Wells Rental Homes Nightmare

• Tunbridge Wells needs 228 additional private rented properties per year to keep up with current and future demand from Tunbridge Wells tenants. 
• Yet over the last 5 years, Tunbridge Wells has lost 364 private rented homes.
• What are the 5 reasons the supply of private rental properties in Tunbridge Wells are falling? What does this mean for tenants and landlords in Tunbridge Wells?

There has been a rise in demand for rental properties and an 8.9% fall in the number of Tunbridge Wells private rented properties, which has caused Tunbridge Wells rents to rise by 5.6% in the last year, a new all-time high. 

The National Residential Landlords Association asked the respected economics think tank Capital Economics, to carry out research on the UK rental market. It found that if the current trends in the property market in terms of growth of the population, Brits living longer, the lack of new homes building, the reduction in social housing (aka council housing), then demand for homes in the private rented sector needs to increase by 227,000 homes per year.

So, based on those numbers, Tunbridge Wells needs to have an additional 228 private rented properties per year. 

The problem is the number of private rented properties in Tunbridge Wells has reduced from 6,815 in 2017 to 6,451 in 2021, a net loss of 364.

So, why has supply of private rented homes in Tunbridge Wells reduced?

1. Section 24 Income Tax

Section 24 was introduced in 2017 to level the playing field on the taxation of property between homeowners and landlords. Section 24 stops landlords from offsetting their buy-to-let mortgage costs against the profits from their rental property. Interestingly, no other kind of UK business is affected by the Section 24 taxation. In other words, whatever other form of business you might be in, be it butcher, baker or candlestick maker, every other business can offset their finance costs against their profits, except buy-to-let.

The issue caused by Section 24 Tax is that some landlords ended up paying more income tax than they really made in profit after paying their buy-to-let mortgages. Meaning on the back of rising Tunbridge Wells house prices in the last five years, some Tunbridge Wells landlords have sold their buy-to-let investments.

2. 3% More Stamp Duty for Landlords

When someone buys a property, they normally must pay a tax to the Government for the privilege. This tax is called Stamp Duty. Yet landlords must pay an additional 3% stamp duty supplement on top of that when they purchase a Tunbridge Wells buy-to-let property. Evidence suggests some Tunbridge Wells landlords have decided to hold off or scale back buying additional buy-to-let properties for their portfolio because of the thousands of extra pounds that landlords have to pay to buy the rental property. 

3. Holiday and AirBnb Lets

Some Tunbridge Wells landlords are converting their long-term rental properties into short-term furnished holiday and AirBnB properties. Whilst the hassle, stress and service levels are much higher, these types of properties do tend to make more money and aren’t as heavily taxed as normal lets. When properties convert to short-term lets, it removes another Tunbridge Wells property out of the general supply chain of long-term rental properties.

4. Greater Legislation for Rental Properties

With more than 150 pieces of legalisation, and new laws being added each year, the burden on landlords is huge. On the horizon is the Renters Reform Bill which will remove the no fault evictions. Also, all rental properties with an Energy Performance Certificate (EPC) rating of below a ‘C’ will have to be improved (i.e., money spent on them) by the landlord. This could be more than £10,000 per property. Hence, why some Tunbridge Wells landlords have been selling their rental properties with low EPC ratings in the last 18 months. 

5. Accidental Landlords Selling Up

There are some Tunbridge Wells landlords who are classed as ‘Accidental Landlords’. In 2008/9, with a slowing property market and house price values dropping in the order of 16% to 19% (depending on the type of property) some Tunbridge Wells homeowners decided to let their home out as opposed to selling it at a loss. Yet, with the price booms of the last 18 months, many decided to cash in on the higher property prices and sell - again taking another private rental property out of the system.

So, why is demand of private rented homes in Tunbridge Wells increasing, even though more people own their home in Tunbridge Wells than 5 years ago?

Even with better provision of affordable social housing and higher rates of owner occupation in Tunbridge Wells (rising from 59.2% of homes in Tunbridge Wells being owner occupied in 2017 to 61.4% in 2021), demand for private rental property continues to outstrip supply. 

There are many reasons behind this including:

1. People are living longer, meaning not so many properties are coming back into the mix to be recycled for the younger generation.

2. Net migration to the UK has continued at just over a quarter of a million people a year since 2017, meaning we need an additional 115,000 households to house them alone.

3. For the last two years, one in six of the owners of properties that have been sold have moved into rented accommodation instead of buying on because of the lack of properties to buy.

So, what is the outcome of the imbalance between supply and demand on Tunbridge Wells rental properties?

Quite simply - Tunbridge Wells rents have rocketed. They are 5.6% higher today than the spring of 2020 … and that’s on the back of rents being 6.3% higher in spring 2020, compared to spring of 2019.

The severe shortage of housing in the private rented sector is pushing up rents in Tunbridge Wells as demand continues to grow. Many Tunbridge Wells people are finding it hard work to find appropriate accommodation at a reasonable rent, and with mounting numbers of tenants predicted to continue, this situation will only get worse unless more houses are built.

My heart goes out to those Tunbridge Wells tenants struggling with the cost-of-living crisis, only to then be hit by higher rents.

Yet, these higher rents are now enticing new landlords back into the Tunbridge Wells buy-to-let market because of the higher returns.

With higher inflation, property investment has been seen in the past a safe harbour to invest one’s money in. With the bonus of rising yields (because of the increase in rents) together with the nervousness of the Bank of England to increase interest rates too much because of the issues in Eastern Europe, this could be the start of a second renaissance in the Tunbridge Wells buy-to-let market.

If you have concerns about the issues in legislation and taxation, then the advantage of employing a letting agent, with the choice of property, what you pay for it and how it’s managed, will go a long way to mitigate them. 

If you are considering getting into the Tunbridge Wells buy-to-let market for the first time or expanding your property portfolio (whether you are a client of mine or not) please do not hesitate to give me a call and we can discuss these matters further.