Ok so rents have stabilised and demand has dampened – well that’s what we said last month and broadly speaking, we’re sticking with this. However, if our January performance was anything to judge the wider market by, perhaps tenant demand isn’t dampening that much. January is always a bit of an artificial month anyway with tenants being put off moving what with Christmas expenditures, the weather being bad etc., and for us, the month didn’t really get going until the second week when demand took off again. And boy, did it take off with the month ending up our best ever January since we started nearly 7 years ago.
It will be very interesting to see if the market dynamics we experienced in January bear out for the rest of the year, namely:
1) A high number of our existing tenants deciding not to renew their fixed term tenancies and, therefore, more properties becoming available for re-let. Because our policy is to actively manage the tenancy renewal process on behalf of landlords, we have a much longer average tenancy life across the portfolio of properties we look after than many of our competitors. Our current average is c.29 months which is great for landlords in terms of minimising costs/maximising profits. Generally speaking the outgoing tenants are professional couples now embarking on the house ownership trail.
2) The properties being remarketed are attracting a high level of interest, not least because they are well maintained and the current tenants have looked after them well. It is fair to say the people applying to rent these properties are a little younger than their outgoing counterparts which should be good news for the landlord as the new tenants are less likely to be buying any time soon and our clients can continue to benefit from longer term tenancies.
3) We have not been able to push the asking rents on these relets. We have taken the view, it is better to have continuity of tenancy than trying (and perhaps failing) to squeeze more than the market will bear. Our average rent across our portfolio is now £710 pcm which is up from this time last year and compares with the national average shown in the Homelet Rental Index at the end of December of £784 pcm. However, if you strip out Greater London from these figures the national average plummets to £684 pcm showing that Norwich is a good place to be invested in property.
Very early days yet to be drawing any meaningful conclusions from any of this but let’s just hope the dampening of demand is over and normal service can be resumed. Should landlords be concerned about rents stabilising and perhaps even falling a touch as the year progresses? The short answer is, yes but….. And the “but” is, a Tenner or twenty per month off the rent is disappointing but if it avoids having a void period then it’s got to be the right way to go. Voids can be the killer to any rental business, particularly if there is a mortgage underpinning it. Remember, if you’re paying tax on your rental profits and you’re a basic rate taxpayer, a £20 decrease equates to £16 net of tax.