Are SE15 Landlords Worse Than Politician’s and Double Glazing Salesmen?
Landlords are getting a lot of bad press recently and the buy to let investor has been accused of all sorts of things including the lack of property for first time buyers. Here is my take from an SE15 point of view.
At the time of the last census in 2011, 3,401,675 properties were privately rented in England, of which about 1.25 million were owned by private landlords. The fast growth of buy-to-let is hugely contentious especially when you consider the speed of growth in this sector. In 2001, there were only 1,798,864 properties under private renting in England (47% less than in 2011). Buy to let landlords have been held accountable for driving up property prices and making it harder for younger generations to be able to buy. There is also growing resentment of the tax relief (estimated to be nearly £10 billion) that landlords claim on their mortgage, which is not available to homeowners.
Landlords may in some cases be asset rich thanks to recently rising property values, but let us not make them the bogeymen. Despite the tax benefits enjoyed by private landlords most are not making large sums of money from the rent each month yet the majority supply good quality housing and are an important part of any housing solution.
Property values today in SE15 are now 131% higher than the 2007 property boom levels, inflation has risen by 29% in the same time frame, so in real terms properties are actually 101% more expensive than they were in 2007. Maybe landlords have helped support property prices to some extent but they have really played a minor role (they represent 19% of the housing stock) when you also consider the lack of house building and the effect of overseas investors in the London property market. Interest rates are at an all-time low and a couple who are first time buyers only need to save a £15,000 deposit to secure a 1/2 bed apartment in SE15 with a 95% mortgage. You can’t believe everything the papers say, first-time buyers can borrow money relatively easily and nine times out of ten, it’s cheaper to buy than rent. So why aren’t people buying?
The number of people renting as a lifestyle choice or for economic reasons has grown over the last 15 years, and this shows no sign of abatement. In fact, I would go as far to predict the number of rental properties in SE15 will have risen from the 3,306 properties in 2011 to over 6,000 by 2021. Sounds fanciful? Well in 2001, there were only 1,626 privately rented properties in SE15.
As a Country we are more and more turning to a European model when it comes to home ownership, where it is considered normal to rent for the first ten years, as opposed to the norm from the 1960’s to 1990’s, where first time buyers were encouraged to buy as soon as they got a job.
It’s clear from the above that Landlords are not the sole reason for the continued growth in property prices, and we need to look to the general election in May for broader solutions to some of London’s property supply issues. However, due to these issues investing in property in SE15 continues to be attractive so long as you can find the right balance between yield and capital growth.