Thursday, 15 January 2015
Why don’t people buy instead of renting in Canterbury?
Quite often, when talking about the rental market, we talk about property and seem to forget the other party in the equation, the tenant. Without tenants, there is no demand for the rental property. The profile of the Canterbury tenant has changed and continues to change. Although this is in part due to the credit crunch, job mobility and the raising of deposits, an increased number of people in their twenties are choosing to rent rather than buy and have done so, even when they were in a position when they could have bought a property.
Since the credit crunch, rents have been good value for money for most tenants outside London. Few rents (outside London) have kept pace with inflation as they tend to track wage inflation. In 2008, the average median gross wage according to Office of National Statistics in Canterbury was £32,977. Latest figures for Canterbury in 2014 show average salaries in the City had risen to £37,297, an increase of 13.1%. I was reading some research from the Bank of England which suggests with regards to inflation, goods and services that cost £100 in 2008 would cost £119 in 2014, making inflation 19% over those seven years.
Canterbury tenants are paying less than both wage and goods inflation. Canterbury rents are in fact still around 5.4% above the level being achieved in 2008 but the tenants are being paid 13.1% more. That is why we have seen a greater demand for Canterbury rental properties with more and more people becoming tenants. So renting has since the credit crunch, on average, delivered good value for money for tenants and hence the healthy demand and lack of void periods for most property.
Overall, even considering the recent rises in property prices over the last 12 months, we are only 0.4% above the 2007 boom prices in Canterbury. With reasonable rents, many would-be first time buyers in Canterbury have been wise to remain in the private rental sector. Rents tend to move in line with wages as opposed to inflation and if something goes wrong with the property, inevitably landlords pick up the bill, so tenants aren’t hit with awful expenditure surprises as a normal homeowner would be. In addition, renting offers better mobility both from a location perspective, but also from a trading up or down perspective in terms of rent commitment which, in this tough job market, could be considered a wise move.
From the landlords point of view, the consequence of this steady / solid market throughout the Canterbury area, with good tenant demand, decent long term capital growth (as mentioned in last week's article) and average yields between 4 and 6%, with home owners it used to be buy, sell, buy, sell as one rose up the property ladder.. Now its buy, hold, buy, hold.
If you would like to discuss my thoughts on the rental markets in Canterbury, feel free to pop into our offices on Watling Street, or email me on firstname.lastname@example.org