“The growth of the private rented sector, and the arrival of
an investor class of buy to let landlords within it, is an issue that won’t be
going away anytime soon, no matter what you read in the Daily Mail”, I said, as
I chatted over a coffee with a landlord client of mine at Esquires Coffee shop
in the Water Gardens in the town. Whether you are a landlord of mine (or not as
the case maybe), I am always happy to look over any properties you are thinking
of buying for buy to let purposes and more so over a coffee!
Some commentators are saying buy to let is about to die,
with the new stamp duty changes and how mortgage tax relief will be calculated.
Some say 500,000 rental properties will flood the market nationally in the next
12 months as landlords leave the rental market. Have you heard the phrase ‘Bad
news sells newspapers’? Let me explain why buy to let in Harlow is only going
in one direction – and not the direction the papers say they are going.
According to Sheffield University, buy to let landlords will
continue fuelling the growth of the private rented sector in the coming
decades. By their estimates (and they are considered a centre of excellence on
the topic), the rate of homeownership nationally will fall to 50% (today it is 57.1%
in Harlow) by 2032, while the rate of private sector renting will increase to
35% (interestingly, in Harlow it stands at 10.9% today).
Therefore, the demand for rental accommodation in Harlow will grow by 772 households in the next five years ... and these are the reasons why, irrespective of the distractions set out in the newspapers
Harlow property values over the last six years have risen a
lot more than average wages/salaries, meaning as homeownership and mortgage
availability is dependent on your ability to pay has served to push home
ownership further out of reach for many, at a time when the stock of council
houses has actually
withered. (Nationally, the number of council houses in the
last ten years has dropped from 3.16m to 2.18m households - a drop of 31.1%).
Now it’s true the Tory’s efforts to fix the deficiency of
affordable housing have focused on those who want to buy a home, ranging from
Help to Buy and their much vaunted Help to Buy Isa, and Starter Homes Scheme,
an initiative offering a 20% discount for first time buyers … but if you are
unable to save for the deposit ... none of this means anything to the ‘20 something’s’
of Harlow ... and they still need a roof over their heads!
Currently, 9,107 people live in private rented accommodation
in Harlow
These are big numbers and a sizeable chunk of the
electorate. So whilst it appears Harlow “Generation Rent” youngsters will
continue to rent and to not to buy for the reasons set out above, Harlow
buy-to-let landlords will be lifted by the projections of greater rental
demand. Harlow and the area around it still offers the prospect of strong
economic growth forecasts and has a reputation as a lively and desirable place
to live. You see, with the new rules on tax, more and more landlords will be
looking to move away from the previous honeypot of central London, because its higher
prices meant lower rental yields. With the new tax rules and central London’s
cooling of house price inflation, more and more landlords will look further
afield, including Harlow (interestingly, I have already been chatting to a few central
London landlords after they read the Harlow Property Blog).
So, by 2021, the number of rental properties in Harlow will
rise to 5,307
This prediction in growth of the Harlow rental market is
even on the back of the government clamping down on tax reliefs for landlords.
The point is this, gone are the days of making guaranteed returns on BTL property.
For the last 20 to 30 years, irrespective of which property you bought, making
decent money on buy to let property was like shooting fish in a barrel – anyone
could do it - but not now. You must take
a more considered approach to your existing and future portfolio, especially in
Harlow. The balance of capital growth and yield, especially in this low
interest rate world we live in, means Harlow landlords need to do more homework
to ensure the investment in property gives the desired returns. One place for Harlow
landlords and homeowners to visit for such information is the Harlow Property Market
Blog.