Tenants In Gravesend Face Rent Increases As Stock Declines

Gravesend tenants face further rent hikes, as the number of available rental homes drops by 67%

1. The number of properties available to rent in Gravesend has dropped from 438 to 145 since February 2020.
2. The average rent a tenant has had to pay in Gravesend has risen from £915 to £1,149 since February 2020.
3. Many Gravesend landlords have cashed in on the post-lockdown property boom of the last two years and sold their properties to owner-occupiers - not fellow landlords.

The supply of Gravesend rental property isn't near what is needed, which is of benefit to Gravesend landlords rather than Gravesend renters. 

There is currently a severe shortage of rental homes in Gravesend. In this blog, I will look into why there are so few rental properties in Gravesend and the surrounding North Kent area, and what that means for buy-to-let investors.

Anyone who enjoys browsing Rightmove, Zoopla, and On the Market, the main three property portals, may have seen that the quantity of rental properties in Gravesend has decreased significantly over the past two years.

The UK as a whole has also noticed this drop. For instance, there were 372,931 rental properties available on the property portals as of 1st November 2020. That number fell to 275,650 on 1st November 2021, and to 171,224 by 1st November 2022. This does not imply that the number of privately rented dwellings in the nation has decreased by more than 50 percent just that fewer rental property is coming to the market.   Here’s why…

Rental prices for tenants have increased as a result of the lack of stock coming to market and subsequent difficulty in finding a rental home in Gravesend, particularly over the past year. 

What exactly is the cause of the lack of rental properties in Gravesend, and what does this mean for current Gravesend landlords or prospective investors thinking about investing in a Gravesend buy-to-let property soon?

The UK estate agency market is experiencing a perfect storm due to a number of distinct factors:

1. The number of households in the UK.

Insufficient housing has been constructed in the UK during the past 20 years. I understand that some of Gravesend looks like one big construction site, but as a nation, we have a terrible shortage of housing.  As a result, demand-driven price increases in housing have continued.  This problem has long been known to the local authorities. According to the 2004 Barker Review of Housing Supply, the UK had seen a long-term increase in real house prices of 2.4% since the mid-1970s due to a lack of house building. According to the report, 240,000 new homes must be produced annually to meet demand. However, since the middle of the 1970s, only about 165,000 homes have been created on average each year, leaving the UK short by 3,375,000 homes (i.e. 45 years multiplied by 75,000 missing homes per year).

To solve this problem, the government set a goal of constructing 300,000 new dwellings annually few years ago.  The actual number of dwellings delivered in 2019–20, however, was just 243,770. Only 216,000 new dwellings were constructed in the years 2020–2021. In a nutshell, because there are fewer houses for sale, there are also fewer houses for rent.

        2. Gravesend renters are residing in their rental properties for longer.

The average down payment for a home in Gravesend is £60,953 (the UK average is £53,935).  In November 2022, the average rent for a Gravesend home will be £1,149 per calendar month, a significant increase from £915 in February 2020.

These figures indicate that tenants in Gravesend are either unable to pay their rent and save for a deposit, or, if they are, it is taking them far longer to do so because of the cost-of-living problem and rising rents.  Additionally, a lot of Gravesend tenants have chosen to remain in their current rental properties as a result of rent increases. When they have a good tenant who maintains the property in good condition and pays rent on time, many landlords are less likely to increase the rate on an existing property. According to anecdotal evidence, rent defaults in those homes are declining as tenants become more aware that, should they default on their rent, it will likely be difficult or expensive to find another rental property.  All of this is good news for Gravesend landlords since it means that:

1. tenants are remaining in their rental homes for longer
2. rent arrears are down
3. void periods are less probable

Due to the reduced supply of rental homes in Gravesend, there is less competition on the market, which increases the profitability of the investment.

        3. As a result of the recent rise in housing prices, landlords are downsizing.

Landlords in Gravesend who invest in buy-to-let properties would find it challenging to ignore the recent increase in home values.  In the summer of 2022, Gravesend's median home value increased by 7.9% from the summer of 2021.  Some Gravesend buy-to-let landlords, particularly those who were categorised as "accidental landlords" (a landlord who never chose to become a landlord, an accidental landlord is a landlord who found themselves unable to sell their property, so they temporarily let their own property out), chose to "cash in" on the higher house prices. This would have also contributed to the dearth of rental homes in Gravesend.

However, landlords in Gravesend can't say that everything is peaches and cream.  Before making a buy-to-let investment, landlords must take into account a number of expenses, such as:

1. regular renovation expenditures
2. buildings insurance
3. letting agents' fees
4. income tax
5. additional stamp duty

Speaking of expenses, some Gravesend landlords are having trouble since they did not prepare properly for the recent increases in mortgage interest rates. Some Gravesend landlords might need to sell their rental property or properties because they have grown accustomed to the extremely low Bank of England base rates that have been in place since 2008. If a first-time buyer purchases it, another home will be eliminated from the private rented sector.

The newly planned laws that would require rental houses to be more energy efficient provide another obstacle. From 2025, it is suggested that all new tenancies must have an EPC (Energy Performance Certificate) with at least a "C" rating (and 2028 for all existing tenancies).  As a result, it is advisable for a buy-to-let landlord in Gravesend to do their homework to ensure that the investment is suitable for their rental portfolio, especially when it comes to weathering any potential financial storms.

Landlords should think about the returns on their buy-to-let investments in Gravesend.

There are two ways that landlords might profit from their buy-to-let properties. 

What does this all mean for the rental market in Gravesend?

Rents will rise since it will be harder than ever to obtain a rental property in Gravesend due to the town's ongoing shortage of available housing. As a result of the Government ruling out the prospect of implementing rent control here to address the cost-of-living crisis, England and Wales do not have rent controls, unlike Scotland.  Rent controls might benefit tenants in the short term, but over the long term, they force landlords to sell their investments, reducing the supply of rental properties available. This has been demonstrated by economists from around the world for the last 75 years.

Rents in Gravesend are therefore very likely to keep going up for tenants.

They have an asset that is in great demand, therefore landlords who stick with their Gravesend buy-to-let homes or start out as Gravesend buy-to-let landlords stand to gain.  It is unlikely that the housing scarcity will be resolved any time soon, let alone the additional problems mentioned above that are influencing the availability of rental homes.