“The growth of the private rented sector, and the arrival of an investor class of buy to let landlords within it, is an issue that won’t be going away anytime soon… no matter what you read in the Daily Mail.” I said, as I chatted over a coffee with a landlord client of mine in the town. Whether you are a landlord of mine (or not, as the case maybe), I am always happy to look over any properties you are thinking of buying for buy to let purposes – and more so over a coffee!
Some commentators are saying buy to let is about to die.
With the new Land & Buildings Transaction Tax (LBTT) changes and how mortgage tax relief will be calculated, some are saying that 500,000 rental properties will flood the market nationally in the next 12 months as landlords leave the rental market. Have you heard the phrase ‘bad news sells newspapers’? Let me explain why buy to let in Penicuik is only going in one direction – and not the direction the papers say they are going.
Facts and Figures
By their estimates, the rate of homeownership nationally will fall to 50% by 2032. Today it is 71.0% in Penicuik. Meanwhile, the rate of private sector renting will increase to 35%. Interestingly, in Penicuik it currently stands at 7.4%.
Therefore, the demand for rental accommodation in Penicuik will grow by 1790 + households in the next five years. These are the reasons why, irrespective of the distractions set out in the newspapers.
Over the last six years, Penicuik’s property values have risen a lot more than average wages/salaries. As homeownership and mortgage availability is dependent on your ability to pay a deposit, this has served to push home ownership further out of reach for many, at a time when the stock of council houses has actually withered. (Nationally, the number of council houses in the last ten years has dropped from 3.16m to 2.18m households - a drop of 31.1%.)
Now it’s true the Government’s efforts to fix the deficiency of affordable housing have focused on those who want to buy a home – ranging from Help to Buy to the much vaunted Help to Buy Isa. But if you are unable to save for the deposit, none of this means anything. Especially to the ‘20 somethings’ of Penicuik and they still need a roof over their heads!
What is the effect on Penicuik Landlords?
These are big numbers and a sizeable chunk of the electorate. So, whilst it appears Penicuik “Generation Rent” youngsters will continue to rent and to not to buy, Penicuik buy to let landlords will be lifted by the projections of greater rental demand. Penicuik and the area around it still offers the prospect of strong economic growth forecasts and has a reputation as a lively and desirable place to live.
With the new rules on tax, more and more landlords will be looking to move away from the previous ‘honey pot’ of central Edinburgh, because its higher prices mean lower rental yields.
With the new tax rules and central Edinburgh’s cooling of house price inflation, more and more landlords will look further afield, including Penicuik (interestingly, I have already been chatting to a few central Edinburgh landlords after reading the Penicuik Property Blog).
This prediction in growth of the Penicuik rental market is even on the back of the government clamping down on tax relief for landlords. The point is this: gone are the days of making guaranteed returns on BTL property. For the last 20 to 30 years, irrespective of which property you bought, making decent money on buy to let property was like shooting fish in a barrel – anyone could do it… but not now. You must take a more considered approach to your existing and future portfolio, especially in Penicuik. In order to balance capital growth and yield, especially in this low interest rate world we live in, Penicuik landlords will need to do more homework to ensure investment in property gives the desired returns.
One place for Penicuik landlords and homeowners to visit for such information is the Penicuik Property Blog.
As always, if you are an investor in the Penicuik property market and would like a second opinion on a property you have seen then send the URL of the properties you have seen online over to me. Or if you would like to pop in and have a chat, then you can either email me on email@example.com or call on 01968 674601. Our address is 6 Bank Street, Penicuik (just round from the TSB – so plenty of parking available). The kettle is always on and we will even pull out the posh biscuits!
A few more interesting articles about the Penicuik property market:
- Penicuik property prices set to drop £18,000 in the next 12 months due to Brexit? http://bit.ly/2cetZzW
- 18% of Penicuik Homes Are Three People Households http://bit.ly/2bl12X4
- Post Brexit property disaster - more like a ‘soft landing’ so far Nationwide claims http://bit.ly/2bkpS3D
- It’s summer time .... and there are burglars about in Penicuik http://bit.ly/2bkzzAz
- A look at how the Private Rented Sector is performing, Summer 2016 http://bit.ly/2aCHqMw