We are not ones for sensationalist headlines, but we do feel the current state of the rental crisis is vastly under reported. Given the inherent structural issues in the residential market, we also see it getting far worse unless there is a dramatic shift in government policy – but we are probably preaching to the converted here.
One thing we have noticed in the last few years is the difficulty in finding comparables for rent reviews. Not too long ago, search a property letting portal and you’d be able to find 25-50 comparables within a half mile radius. These days, you’ll be scratching to find 1 or 2 comparables in a 1-mile radius. We’ve noticed historically at least one of our neighbours would have been a rental property, now pretty much all neighbours are owner-occupiers.
These are vanilla BTL terrace properties in Zones 4, 5 & 6 in London. Pre-2015, returns would be in the mid to low single digits. It’s very difficult to make returns work in these areas now, and capital growth becomes the driver for decisions. Most local estate agents have commented that BTL investors in these areas are few and far between with one quoting that pre-2015, 1 in 6 people registering would be a buy to let investor. That has now blown out to 1 in 200.
In the last couple of years, the rents in our vanilla BTL terrace properties in zones 4-6 in London have increased by 25-50% and they are still under the market rate. We are still trying to strike a balance between keeping good tenants but having rents at sustainable business levels, given that taxation and government compliance costs are skyrocketing.
We have become less concerned about tenant churn because if a tenant moves on, we can achieve a much higher rental figure, any associated costs are quickly absorbed by higher rents and then some. Within a day of advertising, we can have 40 enquiries, most from two working professionals, and have our pick of tenants. We’ll turn the advert off after this as we can’t cope with the enquiries, and no one generally tries to negotiate on price.