The last few years have really felt like the rents have started to increase in Melton Mowbray and the surrounding villages. But what does the data show? We have analysed our data for rental values across the whole of the East Midlands over the last 10 years.
When the recession hit in 2007 we started tracking the data across the region to pull together the rental figure analysis. We caught it just in time to see the effect of the recession on the private rental sector in our area.
Many offices saw relatively flat rents during the recession. The figures show how the effect of the recession on the rents was not reversed until 2015 when we started to see rental levels higher than 2007.
The initial slump in rents when the recession first kicked in can be attributed to the increase in rental stock on the market as property owners were unable to sell property as easily. Although we saw a quick increase in numbers of rentals on the market there were also a lot of tenants looking to rent as there were less mortgages on offer and a much steeper borrowing criteria.
As well as property supply affecting rental values, wages also have a large impact on what rent a property can achieve. We believe that wages are the biggest driver of rent increases.
Unlike house prices, which can carry on rising irrespective of what is happening to wages, rents appear to flat-line when wages rise at less than inflation. We don't tend to see rents rise until wages are increasing at a faster rate than inflation. This means that in areas where there is a shortage of supply versus demand, we see rents rise for a few quarters, then they tend to flat-line again, even if demand remains higher than supply as tenants simply cannot keep paying more rent than their earnings.
This is also likely to be partly linked to tenant referencing / insurance companies requiring 2.5 - 3 times salary to pass affordability tests.
In Melton Mowbray, after the start of the recession we saw more properties come onto the market to let as property owners could not sell but the demand remained high. This did mean rents dipped slightly then flat lined until 2014 and did not see a growth back to pre 2007 levels until 2015.
We are now seeing higher rents achieved each time a property is coming back onto the market to be re-let. For example in 2014 a 3 bed semi detached property in good order with a garage would achieve around £595 pcm and in today's market we would expect to easily achieve £695 pcm - a 16% increase.
In the future I believe rents will continue to rise as the supply of rental property in the private rented sector is outstripped by demand from tenants and this should improve the yields available for investors.
If you have a property let out and you would like to discuss the rental value or are considering an investment property please feel free to give me a call or pop into our office on Burton Street.
Charlotte Baker 01664 569700