A good 18 months has passed since annual rental price inflation in Walsall peaked at 10.7% (June 2016). Since then we have seen increasingly more humble rent increases to 7.3% in November 2017. In fact, in certain parts of the Walsall rental market over the autumn, the rental market saw some slight falls in rents. So, could this be the earliest indication that the trend of high rent increases seen over the last few years, may now be starting to buck that trend?
Well, possibly in the short term, but in the coming few years, it is my opinion Walsall rents will regain their upward trend and continue to increase as demand for Walsall rental property will outstrip supply, and this is why…
The way I see it is this…the counterbalance to that improved rental growth would be to meaningfully increase rental stock (i.e. the number of rental properties in Walsall). However, because of the Government’s new taxes on landlords being introduced between 2017 and 2021, that means buy-to-let has (and will) be less attractive in the short term for certain types of landlords resulting in fewer new properties being purchased to rent out.
Interestingly, countless market experts assumed at the start of 2017, that the number of rental properties would in fact drop throughout the year. The assumption being as the new tax rules for landlords started to kick in, landlords would look to kick their tenants out, sell up and invest their capital elsewhere. So what happens when supply diminishes? Yes, you’ve guessed it…lower supply of rental properties i.e. decreasing the supply, would push rents up again! Ironic isn’t it…?
Anecdotal evidence suggests, confirmed by my discussions with fellow property, accountancy and banking professionals in Walsall, that Walsall landlords are (instead of selling up en-masse), actually are either (1) re-mortgaging their Walsall buy-to-let properties instead or (2) convert their rental portfolios into limited companies to side step the new taxation rules.
The sentiment of many Walsall landlords is that property has always weathered the many stock market crashes and runs in the last 50 years. There is something inheritably understandable about bricks and mortar – compared to the voodoo magic of the stock market and other exotic investment vehicles like debentures and the new fad in crypto-currency (e.g. BitCoin).
Remarkably, there is some good news for tenants, as the Tory’s recently published the draft Tenants’ Fee Bill, which is designed to prohibit the charging of tenants lettings fees on the set up of the tenancy. However, looking at evidence in Scotland, I expect rents to rise to compensate landlords, thus hammering faithful tenants looking for long-term tenancy agreements the hardest. This growth will be on top of any usual organic rent growth. It really is swings and roundabouts!
So, what does this all mean for landlords and tenants in Walsall? In my considered opinion,
Rents in Walsall over the next 5 years will rise by 15.4%, taking the average rent for a Walsall property from £618 per month to £714 per month.
To put everything into perspective though, rents in Walsall over the last 12 years have risen by 17.2%. In fact, that rise won’t be a straight-line growth either, because I have to take into account the national and local Walsall economy, demand and supply of rental property, interest rates, Brexit and other external factors. Please see below graph for my projections.
In the past, making money from Walsall buy-to-let property was as easy as falling off a log. However, with these new tax rules, new rental regulations and the overall changing dynamics of the Walsall property market, as a Walsall landlord, you are going to need to work smarter and have every piece of information, advice and opinion to hand on the Walsall, Regional and National property markets, to enable you to continue to make money.
Whether you are a client of mine or not, I’m always available for a natter and tea. Get in touch to discuss any aspect of our local property market. I don’t do the hard sell and there is no charge for sharing opinions…
Phone: 01922 311016