To paraphrase from the paranormal, “There’s something strange goin’ on in the neighbourhood”. Here we are, coming into the peak letting months in Norwich and anywhere else for that matter but tenant demand just doesn’t seem to be increasing at the rate we would normally anticipate.
This is impacting on Landlords and their agents throughout the local market – we are seeing properties of all types staying on the market for longer which has invariably prompted reductions in asking rents to achieve successful letting. We flagged this up at the back end of last year as a distinct possibility given ‘Help to Buy’ and an improving economy leading to fewer tenants being in the market for rental properties. It seems, unfortunately, we may have been right but we’re still seeing this as likely to be a relatively short-lived phenomena. The fact remains there are more people needing somewhere to live than the supply of housing stock can provide for and despite the politicians “promising” to resolve the situation, we honestly can’t see this being achieved for a good number of years. Indeed, it is predicted that by 2032 over 50% of the UK’s population will be living in rented accommodation (currently c.18% in the private sector). So, this in our view is a temporary hiatus and even though rents may flatten out or reduce for a time, being a Landlord is still a good place to be.
Normally, when we are at this stage in the property lettings cycle, when demand is flat, we see a spike in the number of properties available to rent. Interestingly, that is not the case at the moment; in fact, the reverse is true, there has been far fewer new/re let properties becoming available as tenants are staying longer in their current homes. That’s great news for Landlords with tenants in situ – longer tenancies equating to stable cashflows and fewer void periods but it’s awfully bad news for letting agents. Fewer new Landlords and fewer new tenants at the exact same time, for many letting agents this will be like meeting that huge wave in the Perfect Storm. Seven years ago, when Martin & Co first opened our doors for business in Norwich, there were around 42 agents, based within a 10 mile radius of us, advertising properties to let on Rightmove. Today there are 102…… This number is unsustainable and already we’re seeing the concerned agents with special offers trying to entice Landlords in. One of three things will happen to a good number of our competitors:-
- 1. Those who are financially less secure will get fed up and pack it all in.
- 2. The estate agents who added a lettings arm when their sales businesses looked precarious will get bored with the management intensive nature of lettings and start neglecting the lettings side.
- 3. The less scrupulous will steal their client’s money to make ends meet and will then abscond.
Yes, we know we bang on all the time about being very wary who you’re in bed with, letting agent-wise but now, more than ever, it is vitally important you check and double check you’re not going to get caught in the 3rd camp. It’ll be a huge, huge pain to end up in any of them but at least if you get caught in the first or second, it’s not irredeemable and you’ll be able to switch to a lettings specialist who will stand the test of time in terms of both service and financial strength. Just remember, Big doesn’t necessarily mean Best. The large corporate agents may offer financial security but their service levels are traditionally very poor, or so all of our new Landlord clients who’ve switched from one of them to us, have told us.
Right, enough of that, what have rents been doing? The overall figures for the UK are completely distorted by what’s happening in Greater London and the lazy London based media jump on this to have us all believe that what’s happening there is happening throughout the country. However, most of the individual regions in the UK showed either a flat position or a decrease in rents in the recently published Homelet Rental Index for April 2014. None more so than East Anglia where the average rent for April was £712 pcm compared with £725 pcm in March whereas the annual variance was almost flat between April’s 2014 and 2013. Good news for our valued clients – the average rent displayed by the portfolio of properties we manage for them is holding firm at £715 pcm.