A HUGE Shift in the Market, gave me a big SHOCK this week…
I must admit I am a bit of a figures person and I know my numbers, in fact I seem to pre-empt what I’m going to see and I am rarely disappointed, but I did have a shock this week, when reviewing the figures for one of my oldest branches…
…The ratio between applications received and then completed as in “moved in” had hugely dropped.
And not by just a few points either, we are talking from 95% down to 54% no less.
Now normally when I see this particular figure drop, it’s usually because the administrator is being too slow, or not keeping people up to date, or I have an inexperienced negotiator that is taking applications from just anyone to get the numbers in but they are not proceedable, so it’s fair to say I was ready for a fight.
After nearly falling on the floor and starting to chunter about all that could possibly be going wrong, deals being lost etc.
I then compared this to my next oldest branch and found exactly the same… this was a bigger problem than I realised, and needed acting on FAST, I had to find out why and where this statistic had come from and why it had changed so dramatically in just a few months.
Now we are all hearing about the shortage of property stock around at the moment, less people buying property, but also, less talked about is the fact that tenants are staying longer too. We have always worked on 5% of our managed properties being vacated every month, but in the last 12 months that has dropped to only 3% each month, that means around 10 less properties coming available for re let per branch.
Plus there is a huge demand from new tenants, those coming into the country for work, home leavers, as well as the HMO and LHA market which many of our branches work with too, we certainly have a glut of tenants at the moment, with our established branches reporting over 1500 tenants registered and actively looking at any one time, figures we have not seen ever before.
So I decided to dig deeper, how could this be leading to a big DROP out of applications?
Surely if they were applying for property and property was scarce, they would not be dropping out, they would be clinging on to it!
So I looked at the offers report, and it all became clear, we had received pretty much 2 applications for every property we let, in fact on some property 3 applications… this was new!
For some time property has been renting fast, but I was not aware of how fast it had exploded in the last two months, to this point, which means we needed to now optimise on this and start working to find properties for the unsuccessful applicants within our marketing.
So what’s going to happen now with the property stock and private rental market, as the tax changes and stamp duty take a hold?
According to Savills in their excellent autumn report http://pdf.euro.savills.co.uk/uk/residential—other/policy-response-buy-to-let-tax-relief-autumn-2015.pdf they state that only 30% of PRS properties have a buy to let mortgage on them, so it sounds like the majority of landlords will not be affected by the tax changes, in effect, apart from the stamp duty.
I believe, accidental landlords will still come to the market, in ENGLAND at least, (in Scotland the withdrawal of section 33, called section 21 in UK will prevent short term landlords from renting no doubt), the cash buyers and low leveraged landlord investors will have a field day, maximising on the increased rent driven by huge tenant demand as a result of shortage of property stock, and the mortgaged landlords will have to review their strategies on buying properties, perhaps considering lower loan to equity ratio’s, paying down some of their debt by selling a few units, so they too can capitalise on the increased rent and stay in the game. Whilst institutional investors start to have an impact in the cities with big rental developments designed for purpose.
Tenants though, it seems are likely to suffer from a short term increase in rents basically due to the supply and demand tilt we are witnessing at the moment and this in turn may make a few decide to buy instead of rent, the result in the end? A re-balancing of the market, back to normal again…
But hey I’m not an economist, so let’s wait and see. Either way it’s going to be an interesting few months and maybe years, and no doubt as ever when time get hard for some, others see opportunity… lets hope so, for the tenants needing homes, if nothing else.