Despite George Osborne’s unfriendly Landlord budgets it is still likely that “buy to let” landlords will continue to invest no matter what you read in the press. I discussed this very point with one of our Landlords who I bumped into at Persepolis on Peckham High Street.
As you may know, George Osbourne has introduced stamp duty changes that affect the buy to let market and second home owners. He has also changed the way mortgage tax relief can be calculated. Even in the property press, there has been news about how 500,000 rental properties will flood the market over the next 1 to 2 years. Well, you can always say that bad news sells newspapers, but the fundamentals of the Peckham property market means it’s likely to be going only in one direction. And that’s, not the direction stated in the press.
It has been reported by Sheffield University that the rate of homeownership will fall nationally to 50% while the percentage of those renting in the private sector will increase to 35% by 2032. It is this demand that is likely to see buy to let landlords continuing to enter the market. However, in Peckham homeownership has already dropped below the predicted 2032 national f
igure, with only 29.9% classified as homeowners, which also means there is a high density of rental properties, which in Peckham currently stands at 18.1% (5,121) today.
Given the expected growth in the private rental sector to 22% by 2021, the demand for rental accommodation in Peckham will grow by 1,104, and this is why despite the distractions set out in the budget and the gloom in the newspapers the sector will remain strong.
In Peckham, we have seen average property prices grow by 55.6% in the last six years, significantly outstripping wage growth. As home ownership becomes harder alongside the reduction in the provision of social housing ( which
has nationally fallen by 31.1% of the last ten years to 2.18m homes), the ongoing housing needs will need to be met by the private rental sector (PRS).
Whilst successive governments seem to have been unable to address the route cause of the housing issue (ie lack of supply of new housing and also affordable rental stock) their continued interference in the market with schemes such as Help to Buy appear to be short sighted and only serve to put upward pressure prices for the limited housing stock that does come on the market. I guess the point is that despite the government’s medalling people still need somewhere to live and if they can’t buy they have to rent, and this has to
be positive news for those in PRS.
Currently, 13,606 people live in private rented accommodation in Peckham
These are big numbers and a sizeable chunk of the electorate. So while it appears Peckham “Generation Rent” youngsters will continue to rent and not to buy for the reasons set out above, Peckham buy-to-let landlords will be lifted by the projections of greater rental demand.
Peckham and the area around continues to develop and is becoming a much more desirable place to live. As the new rules on taxation for Landlords kick in you will probably see Landlords divert their attention away from Zone 1 because of it’s very high prices and low yields to places like Peckham where they feel they can continue to make good returns.
So, by 2021, the number of rental properties in Peckham will rise to 6,225
So despite the government looking to cool the buy to let market in Peckham by reducing tax reliefs, it looks like the PRS in Peckham will continue to grow for the reasons outlined above. However, it is no longer the case that you will make guaranteed returns, over the last 20 to 30 years irrespective of
which property you bought there was a very good chance you would make money. Now you will really need to focus on your initial deposit, cash flow, and interest rate payments to ensure you keep a positive income and don’t get any nasty tax bills. Having a Peckham Estate Agent that understands the local market can help guide you to those investments so feel free to come in and seem me at the office anytime or just give me a call.