Norwich Lettings Market – July Catch-up

Norwich Lettings Market – July Catch-up

Our regular readers were probably wondering why you didn’t receive a copy of our Norwich Property Newsletter last month? The simple answer is the Summer lettings rush kicked in with a vengeance and we were just too busy to write one. Sorry about that.

July was a complete contrast to June, for the second year in succession June was a fairly quiet month in comparison to previous years and leads us to believe the ‘lettings season’ in Norwich is now starting later but (if the last few years are anything to go by) is lasting longer into October. While the season is now in full swing, as predicted earlier in the year, underlying rents haven’t really pushed on and we don’t anticipate much upward movement in this direction. When you’re as close to the market as we are, it is interesting to compare and contrast the approach to rents of the (seemingly endless number of) agents in Norwich; those who over-egg the pot in the hope the market will catch up with their over-pricing, or, those who are always behind the game and are under-pricing. Neither of these are doing their landlord clients any favours; in both June and July, we saw a large number of available properties sticking for longer than they should have done with the inevitable eventually happening, namely a reduction in the asking rent. That’s fine if you’ve a tenant in situ and your agent has plenty of time to find you their replacement, not so great if you’re already suffering a void period. Unfortunately, agents being agents, there are a good number around who use the promise of achieving you a higher rent as an instruction winning technique knowing full well that you’re going to have to agree to a reduction at some point. Those are the ones that are just interested in hitting their commission targets and not necessarily working in partnership with you over the long term.

The ONS (Office for National Statistics) published their annual figures last week which showed rents nationwide have risen by only just over 1% overall. This can only be down to wages remaining stagnant for the most part across the country although the figures contrast with those that we normally bring you from Homelet which show an overall increase of c.6%. That’s a big variance but one important factor is that HomeLet’s index covers only new tenancies, whereas the ONS index covers existing ones too. This implies that people who have remained continuous tenants over the past six years will have done quite well. But people who have started renting, or moved, will have suffered.

Which index is superior? That depends on what one is trying to measure. If it’s the broad experience of renters then the ONS one is better. But if it’s people coming into the market or moving frequently (as younger people often do) then the HomeLet index captures their experience more fully.

For East Anglia, the contrasting figures are Homelet +3.6% and the ONS +0.8%. Unless you’re simply looking for income from your investment and therefore are not too worried about its capital growth prospects, Landlords do need to factor capital growth into the mix and consider their total returns. With typical investment properties having gone up c.7% in value in this neck of the woods over the last 12 months the overall returns are not too shabby. Bear in mind too, that 7% will compound year on year.

We have the pleasure of advising lots of would be investors who are keen to turn their moribund savings into an income/capital generating property investment. They come to us, usually on recommendation, because we tell the real story and as specialist letting agents we have nothing to sell them. So, when we say “Snog, Marry or Avoid”, we’re not spinning a line to make a sale. Estate agents by contrast usually only ever say “Marry” when they have a potential investment property for sale. In recent months, our would be clients have been missing out as there has been a rush among investors for good quality rental properties in the c.£150,000 price range with many such properties being over-bid. However, in recent weeks in line with the housing market nationwide, we’re seeing prices plateau. The reasons for this are well documented in the media but it does mean, for now anyway, there is less of a feeding frenzy and good properties are available at reasonably sensible prices. With the threat of interest rate rises, this should hold good for the next few months at least.

If you are thinking of adding to your portfolio, or becoming a first time Landlord and want some impartial advice, give us a call on 01603 766860.