I was having an interesting chat the other day with a couple
of solicitors at a Grantham business networking event, when the subject of a
lack of property for first time buyers came into the conversation. I followed the chat up with an email with my
findings, findings which I would like to share with you today.
At the time of the last census in 2011, there are 3,401,675
properties in England that were privately rented, of which it is estimated,
were owned by over 1.25 million private landlords. The rapid growth of buy-to-let
is hugely controversial, especially as only ten years before that, there were
only 1,798,864 properties under private renting in England. Buy to let landlords
have been held responsible for forcing up property prices and preventing our younger
generations from being able to buy. There is also growing resentment toward the
billions of pounds in tax relief (estimated to be nearly £10 billion) landlords
claim on their mortgage interest -tax relief not available to homeowners.
They may be asset rich thanks to recently rising property
values, but let us not make the landlords the bogiemen they could easily be
called. Despite all these benefits enjoyed by private landlords, let us not
forget the good they have done, especially in Grantham.
Property values today in Grantham are still 11.7% below the
2007 property boom levels (2007 being the peak of last property boom before
everything dropped in 2008/9), yet inflation has risen by 26% in the same time
frame, so in real terms, properties today are 37.7% CHEAPER than they were in
2007. Just think how low they would be without landlords buying all those
rental properties in the city. Interest rates are at an all time low and first
time buyers only need to save a £3,500 deposit to secure a lovely 2 bed
terraced in the Grantley Street area with a 95% mortgage. Forget what the
papers say, first time buyers can borrow money relatively easily on a 95%
mortgage and nine times out of ten, it’s cheaper to buy than rent. So why
aren’t people buying?
The number of people choosing to rent, either for lifestyle
or economic reasons, has grown over the last 15 years. I also believe they will
continue to grow for some time to come (as does every report on the subject).
In fact I would go as far to predict the number of rental properties in Grantham
will have risen from the 3,132 properties recorded in 2011 to £4,350 by 2021.
Sound fanciful? Well in 2001, there were only 1,496 privately rented properties
in Grantham.
It is a fact that we as a Country are more and more turning
into a European model when it comes to homeownership, where the norm is renting
for the first ten years, as opposed to the norm from the 1960’s to 1990’s,
where first time buyers were encouraged to buy as soon as they left school and
got a job.
Tenants, in particular, will also feel the benefit from potential
changes in the market. The likelihood of interest rate increases in late 2015,
existing economic conditions, combined with the uncertainty of new Government
manifestos following the General Election in May will result in low demand for
people to buy yet also put a dampening effect on increases in rent. As long as landlords
buy the right sort of property, that allows for a reasonable yield, decent capital
growth, everyone will be a winner.
If want a
chat about what would make the best sort a property that would offer that in Grantham,
then please email me on christopher'christopherwatkin.co.uk or visit my Grantham
Property Blog
