Warrington Buy-To-Let Predictions up to 2037

On several occasions over the last few months, on my Warrington Property Blog, I predicted that the rate of rental inflation (i.e. how much rents are rising by) had eased over the last year. At the same time, I felt that in some parts of the UK rents had dropped for the first time in over eight years. Recent research backs up this prediction.

Supply VS Demand

Rents in Warrington for new tenancies only grew by 0.9% in the last 12 months (i.e. not existing tenants experiencing rental increases from their existing landlord). When we compare that current rate with the historical rental inflation in Warrington, an interesting pattern emerges.

·         2016 - Rental Inflation in Warrington was -1.0%

·         2015 - Rental Inflation in Warrington was 2.1%

·         2014 - Rental Inflation in Warrington was 0.6%

The reason behind this change depends on which side of the demand/supply equation you are looking from. On the demand side (from the tenants’ point of view) there is the uncertainty of Brexit and the fact that salaries are not keeping up with inflation for the first time in three years. Critically this means tenants have less disposable income to pay their rent. As an aside, it is interesting to note that nationally, rent accounts for 29% of a tenant’s take home pay (Denton House).

On the supply side of the equation (landlords point of view) Brexit also creates uncertainty. However, the biggest issue was a massive upsurge of new rental properties coming on to the market in late 2016, caused by George Osborne’s new 3% stamp duty tax for landlords in the first part of 2016. This meant a lot of new rental properties were ‘dropped’ on to the rental market all at the same time. The greater choice of rental properties for tenants curtailed rental growth/inflation. A slight softening of Warrington property prices has compounded this. 

Figures from The Bank of England suggested that first time buyers rose over the last 12 months as some were more inclined to buy instead of rent. Together, these factors played a part in the ongoing moderation of rental growth.

Brexit

The lead up to the General Election in May didn’t help: after all people don’t like doubt and uncertainty. So now that we have a mandate for going forward over the next 5 years, hopefully that has removed any stumbling blocks stopping tenants making the decision to move home.

Whether it be ‘hard’ or ‘soft’ Brexit negotiations (and with the Election result the Tory’s might have to be ‘softer’ on those negotiations), the simple fact is, we aren’t building enough properties for us to live in. Both in Warrington, the North West and the wider UK, long-term population trends imply that rents will soon be growing faster than inflation again.

Look at the projections by the Office of National Statistics.

Population Estimates for Warrington Borough Council over the next 20 years
2016 (actual)	2021	2026	2031	2036
209,117	215,954	222,147	227,162	231,594

Tenants will still require a vibrant and growing rental sector to deliver them housing options in a timely manner. As the population grows in Warrington, and wider afield, any restriction to the supply of rental properties (brought about by poor returns for landlords) cannot be in the long-term best interest of tenants.

Simply put: rents must go up!

The fact is that I see this as a short-term blip and rents will continue to grow in the coming years. With rents only accounting for 29% of a tenants’ disposable income, the ability for most tenants to absorb a rent increase does exist.

You can always keep an eye on my blog for any properties I feel will make a good buy to let opportunity, or if you are after a second opinion then email me on manoj@hamletwarrington.co.uk or call on 01925 235338. If you are in the area, feel free to pop into the office – we are based on 6 Bankside, Crosfield St, WA1 1UP. There is plenty of free parking and the kettle is always on.

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