October was a vibrant lettings market in Norwich, as it usually is before heading south for the Winter. Our pipeline of applications taken in October for move-ins in December/January is looking healthy too, however, there's no doubt rents are levelling. While we've been seeking to push rent levels on this year they have been slowing down throughout the year to the extent where, in certain instances, landlords have had to agree to reductions.
The recently published Homelet Rental Index for September shows rents in East Anglia for the month between Aug-Sept down some 1.4%. The average rent across the portfolio of properties we manage is holding steady at £705 pcm.
Looking ahead, where is the market going to be next year? Our thinking at the moment is that even with a steady recovery in real salaries tenants won't be able to (or, perhaps won't be prepared to) pay increased rents. However, we think with a combination of continued deflation in food and petrol prices together with real salaries continuing to increase during 2015 perhaps this will change in the latter part of the year. Certainly, the number of renters coming into the market will continue to increase and unless the supply of available rental properties goes up commensurately, then rents will be pressured upwards.
It is a moot point whether or not more landlords will come into the market and/or existing landlords will seek to increase their portfolios. Our view is 'Yes' most definitely, provided Government, stupidly high house price increases and interest rate rises don't prevent them from doing so. On the first point, Government intereference, or not, will depend on the colour of the political party taking power after next May's election (see our separate article below). Stupidly high price rises are not yet sustainable within a still recovering economy as we have seen this year; prices have stabilised during the last 4 months and the number of property transactions being completed has slowed. As for interest rates going up, this has got to be on the horizon hasn't it? Well perhaps not provided wage inflation doesn't go bonkers and food and petrol prices continue to deflate and in any event, rates are unlikely to rise until after the election.
So what's the upshot of all this? With the number of house sales having dropped off and prices having stabilised; with the banks being willing to lend at attractive fixed rates; with tenant demand likely to continue to increase and rents remaining steady, now would definitely be a good time to either get into the business of being a landlord or add to your portfolio. Generally speaking, those people who try to sell their houses at this time of year do so for a reason and they are motivated sellers, therefore. Accordingly, you're more likely to be able to buy at a sensible price and as the banks are quieter, there's less faffing about. Put in an offer in November/December/January and you won't be completing for at least two full months, so when you get the keys, tenant demand will be coming out of its seasonal hibernation.
Martin & Co Norwich