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The Future of the Gravesend Buy-to-Let Market in 2024

3 months ago
The Future of the Gravesend Buy-to-Let Market in 2024

A recent analysis has brought attention to this concerning trend. In 2023, only 261,542 private rental homes were available each month in the UK, marking a sharp decline from the 2020 monthly average of 379,459 rental homes—an alarming 31% decrease. This decline has been unfolding over the past few years.

The scarcity of rental properties is occurring alongside an increase in mortgage costs for landlords, putting additional pressure on the rental market. Higher interest rates, coupled with high demand for rental properties, have led to a significant spike in rental prices, rising from £1,343 per month in 2020 to £1,739 per month in 2023—an increase of 29%. This surge makes it increasingly challenging for tenants to find affordable housing.

The combination of reduced availability and rising costs is creating a challenging environment for renters, who are finding fewer properties available at higher rents.

Mortgaged landlords are also feeling the financial strain, leading some to reconsider their business models and divest from rental property portfolios. This has had a profound impact on the market, with average buy-to-let mortgage rates experiencing a sharp increase, further intensifying the challenges faced by landlords and tenants.

The dynamics of the UK rental market have shifted significantly, with rents rising by 29% and available rental stock dwindling by 31% since 2020.

The Bank of England has highlighted potential repercussions in its financial stability report, noting that landlords may seek to raise rents to offset higher costs as fixed-rate mortgages come to an end. This could exacerbate difficulties for tenants, particularly those with lower incomes and savings.

The supply crunch in the rental market has led to increased competition among prospective tenants, resulting in many properties being quickly rented to quality tenants. This competition drives rents upward, making it even more challenging for new tenants to find affordable housing. Existing tenants are also reluctant to move, fearing higher rents elsewhere, contributing to the shortage of available properties.

This situation is particularly acute at the lower end of the price spectrum, where the availability of homes to rent for less than £1,000 a month has significantly declined, making it even more challenging for those on tighter budgets to find suitable housing.

In 2020, 740,027 rental properties under £1,000 per month were available in the UK. This dropped to 464,774 in 2023, a 37.2% decrease. In contrast, the market for premium properties (over £2,000 per month) has seen an increase in availability of 52.6%, highlighting stark disparities within the rental market.

The implications of this trend are far-reaching, affecting not only those currently looking to rent but also the broader housing market and the economy.

How is this an opportunity for Gravesend landlords?

The current property market could present a notable opportunity for Gravesend landlords. To explore this, we must examine the background statistics and numbers for the Gravesend area.

Average monthly stock levels of private rental homes in the Gravesend area (DA11/12) are as follows:

  • 2019: 375 rental properties per month
  • 2020: 317 rental properties per month
  • 2021: 274 rental properties per month
  • 2022: 257 rental properties per month
  • 2023: 232 rental properties per month

The average rent in the Gravesend area was £928 per calendar month in 2020, increasing to £1,251 per calendar month in 2023. Gravesend rents have risen by 35%, with available rental stock dwindling by 27% since 2020.

The escalation of rental prices signifies a robust income stream for Gravesend property investors. This is particularly advantageous in a market where high demand ensures properties are let swiftly, often to quality tenants willing to pay a premium for scarce housing options. For Gravesend landlords, this means not only an immediate increase in rental income but also the prospect of sustained long-term profitability as market dynamics push Gravesend rents even higher.

Furthermore, the challenging mortgage landscape, with rising buy-to-let mortgage rates and high percentage mortgages, has led to more landlords leaving the market. This reduces competition and potentially increases demand for existing Gravesend rental properties even further.

This unique set of circumstances presents an opportune moment for current and prospective landlords to capitalize on their Gravesend property investments, leveraging the tight supply to secure higher rental yields and enhance the attractiveness of their property portfolios.

What about Gravesend tenants?

As the UK grapples with this challenging rental market landscape, a multifaceted approach is needed to address the underlying issues. This includes considering the impact of mortgage costs on landlords, the affordability of rents for tenants, and the overall availability of rental properties.

The Government needs to build more homes. Excluding land, building costs in the UK start from £163 per square foot. A 3-bed semi is a minimum of 1000 ft.². Britain is approximately 2 million households short now, meaning the bill for those additional 2 million homes would be £326 billion (excluding the land). The Government currently spends £17.35 billion a year on housing, which would need to increase to £49 billion a year for the next ten years to pay for those 2 million homes. To give you an idea of what that would cost taxpayers, income tax would need to rise by 5.81 pence in the pound to pay for those additional 2 million homes. That is the equivalent of an extra £991 per year for every taxpayer for the next ten years—not a vote winner!

Without significant Government intervention and strategic planning, the difficulties tenants face in finding affordable homes will likely persist, with potential long-term implications for the housing market and the broader economy.

Meanwhile, British landlords must pick up the pieces and continue to buy properties. Unfortunately, it is the nature of the game that with limited supply and increasing demand, prices (i.e. rents) go up. My heart goes out to Gravesend tenants having to pay these increased rents, but the market is the market, and we cannot control that. It has been proved beyond doubt, in Scotland and around the world, that rent controls do more harm than good, so I hope that the Government grasps the nettle and finally does something to sort our housing issues once and for all in the medium to long term.

Please do give me your thoughts on the matter.

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