Gravesend Rental Homes Nightmare
• Gravesend needs 202 additional private rented properties per year to keep up with current and future demand from Gravesend tenants.
• Yet over the last 5 years, Gravesend has lost 278 private rented homes.
• What are the 5 reasons the supply of private rental properties in Gravesend are falling? What does this mean for tenants and landlords in Gravesend?
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 and 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, Gravesend needs to have an additional 202 private rented properties per year.
The problem is the number of private rented properties in Gravesend has reduced from 5,207 in 2017 to 4,929 in 2021, a net loss of 278.
So, why has supply of private rented homes in Gravesend reduced?
1. Section 24 Income Tax
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 Gravesend buy-to-let property. Evidence suggests some Gravesend 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.
Some Gravesend 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 Gravesend 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 Gravesend landlords have been selling their rental properties with low EPC ratings in the last 18 months.
5. Accidental Landlords Selling Up
There are some Gravesend 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 Gravesend 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 Gravesend increasing, even though more people own their home in Gravesend than 5 years ago?
Even with better provision of affordable social housing and higher rates of owner occupation in Gravesend (rising from 58.31% of homes in Gravesend being owner occupied in 2017 to 60.45% 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 in to 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 Gravesend rental properties?
Quite simply – Gravesend rents have rocketed. They are 6.2% higher today than the spring of 2020 … and that’s on the back of rents being 6.5% higher in spring 2020, compared to spring 2019.
The severe shortage of housing in the private rented sector is pushing up rents in Gravesend as demand continues to grow. Many Gravesend 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 Gravesend 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 Gravesend 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 Gravesend 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 Gravesend 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.