Investing in a Derby buy to let property has become a very different animal over the last few years.
In the glory days of the five years after the turn of the Millennium, where we had double-digit house price growth, mortgage companies desperate to get on the buy-to-let mortgage bandwagon ridiculously low rates and a willingness to give loans away with just a note from your Mum plus hardly any regulatory intervention… anyone could make money from investing in property – in fact it was easier to make money than fall off a log!
Yet, over the past five years, the thumbscrews on the buy-to-let market for Derby investors have slowly turned with new barriers and challenges for buy-to-let investors. With the change in taxation rules on mortgage relief starting to bite plus a swathe of new rules and regulations for landlords and mortgage companies, it cannot be denied some Derby landlords are leaving the buy-to-let sector, whilst others are putting a pause on their portfolio expansion.
With the London centric newspapers talking about a massive reduction in house prices – mainly in Mayfair and Prime London – not little old Derby – together with the red-tape that Westminster just keeps adding to the burden of landlords’ profit, it’s no wonder it appears to be dome and gloom for Derby landlords … or is it?
It’s true, investing in the Derby buy to let property market has become a very different ballgame in the last five years thanks to all the changes and a few are panicking and selling up.
Derby landlords can no longer presume to buy a property, sit on it and automatically make a profit.
A Different Perspective
Landlords need to see their buy-to-let investments in these tremulous times in a different light.
Before landlords sell up because values are not growing beyond expectation, let’s not forget that properties produce income in the form of rent and yield. The focus on buy-to-let property in these times should be on maximising your rents and not being preoccupied with just house price growth.
Rents in Derby’s private rental sector increased by 3.82% in the past 12 months
Rents in Derby since 2008 have not kept up with inflation, it is cheaper today in REAL TERMS than it was 11 years ago and some landlords are beginning to realise that fact with our help.
Looking at the last few years, it can be seen that there is still a modest margin to increase rents to maximise your investment, yet still protect your tenants by keeping the rents below those ‘real spending power terms’ of the 2008 levels.
Buy-to-let must be seen as a medium and long-term investment…
Rents in Derby are 9.2% higher than they were 3 years ago and property values are 13.05% higher than Jan 2016
…and for the long term, even with the barriers and challenges that the Government is putting in your way – the future couldn’t be brighter if you know what you are doing.
There are 86,056 tenants in Derby!
Surprised? With the General Election over with, lets reflect on renting in the manifestos and party-political broadcasts and ask why?
The best way to tell the future is to look at to the past, so lets look at the number of people who rented a century ago . Surprisingly 76% of people rented their home in the UK as renting then was considered the norm. Yet in the latter part of the 1920’s, builders of the suburban housing estates with their bay fronted semis started to sell the dream of home ownership to smart renters.
Up until the mid 1920’s, the mortgage had been seen as a millstone around your neck. Now, due to some clever marketing by those same builders, it was started to be seen as a shrewd long-term investment to buy your own home with a mortgage. It fuelled the ambitions and goals of the up and coming well-to-do working class. Meanwhile, the Government encouraged people to save in Building Societies whom in turn lent the money to these up and coming new homeowners thorough mortgages.
Lets roll the clock forward to the decade of the young Elvis, Chuck Berry, and Bill Haley … in the 1950’s, still 72% of Brits rented their home. Homeownership had boomed in the preceding 30 years, yet so had council house building. Then, as we entered the 1960’s and 1970’s homeownership started to grow at a higher rate than council housing.
The rate of homeownership started to drop substantially after the mid 1990’s, and now we roll the clock forward to today, there is no stigma at all to renting … everyone is doing it.
In fact, of the 251,267 residents of Derby, 86,056 are tenants renting from either the council, housing association or private landlords – meaning 34.2% of Derby people are tenants.
A change in Election direction..
On the run up to every General Election, housing is used to get votes. This is nothing new, as all parties have always used housing to get votes, although previously it was about which party would build more council houses in the 1950’s through to council Right to Buy and promises to help first time buyers… numerous election campaigns promising everybody their own home in one way or another.
Yet, at this election something changed? The parties weren’t talking so much about increasing homeownership but about protecting the tenant. It seems the link between homeownership as the main goal of British life is starting to change as we are slowly turning to a more European way of living.
Renting is here to stay in Derby and incrementally growing year on year. You see, in Britain there is no property tax based on ownership, which many other western countries have. Instead Council Tax is paid by the occupier of the home. The tenant pays, not the owner.
Both parties wanted to end no-fault evictions (which is a good thing), yet Labour went further and mentioned rent controls in their manifesto… was that another headline to grab votes? The fact is the majority of new British households formed since the Millennium can now expect to rent from a private landlord for life – therefore the parties focus on this important demographic.
Supply, Demand and all that…
Demand for rental properties has never been higher yet all the talk is of landlords leaving the sector. Demand goes up, supply goes down (or stays the same) and rents go up.
Even with the new mortgage relief tax rules for landlords and the 200+ of legislation that govern the private rental sector, buy-to-let is still a viable investment option for most investors in Derby. There has never been a better time to purchase buy-to-let property in Derby… but buy wisely. Gone are the days when you would make a profit on anything with four walls and a roof.
Most importantly do your homework, take advice and consider your options. In the old days, anything with a front door and roof made money – and now it doesn’t.
Knowledge is Power!
Tenants will pay top dollar for the right property but in the right condition.
Do you know where the hot spots are in Derby?
Whether demand is greater for 2 beds in Derby or 3 beds?
Whether city centre apartments offer a better rental return than terraced houses or semis?
With all the regulations many Derby landlords are employing us to guide them by not only managing their properties, taking on the worries of property maintenance, the care of property and their tenants’ behaviour but also advising them on the future of their portfolio. We can give you specialist support (with ourselves or people we trust) on the future direction of the portfolio to meet your investment needs by judging your circumstances and need between capital growth and yields, specialist finance and even put your property empire into a limited company.
If you are reading this and you know someone who is a Derby buy to let landlord, do them a favour and share this article with them – it could save them a lot of worry, heartache, money and time.
We ARE the letting specialists in Derby. Call us now on 01332 300172.