Over the past few weeks, I’ve spent some time assessing the local housing market and a factor I found particularly striking is that, not only have house prices rocketed since the introduction of the stamp duty holiday in July, but that rents have increased in parallel by a similar percentage.
This reminded me of a blog that I wrote a few years back comparing Gillingham & Chatham rents and highlighting that Gillingham rents were around 18% higher than rents in Chatham. That was 2018 and a lot has changed since then!
We have not only seen the recent increase over the past six months, but also (ironically..!) an increase around the time of the tenant fees ban.
Single Let & HMO Rental Rates
Rents for Gillingham, Chatham and Rochester appear to have levelled up somewhat when you look at a four-bedroom property. However, when you look at a three-bedroom property there is a clear variation between Chatham and then Gillingham / Rochester. This is a very interesting statistic and one that I will be looking into in more detail.
According to Zoopla, there are 224 properties to rent in Medway (compared with 347 in October 2018), however, what is interesting is that there is a significantly higher number of three and four bedroom properties in Gillingham in comparison with Chatham and Rochester.
When you look at the HMO market, the table below gives an outline of the number of rooms available according to Spare Room along with the average rents for the rooms we let.
When it comes to HMO rents, they do tend to be the same across the three areas, however you take into consideration tenant demand and location (for example, Gillingham tends to be quite a saturated area).
What is interesting is that since 2018, HMO rents have increased by 47% from £340 to £500 per room. Whilst a degree of this increase would be due to the usual uplifts, it largely reflects an increase in demand, additional regulations, and a need to achieve a much higher specification.
Property Yields Based On Zoopla List Prices
Let’s look at yields as that gives us some good food for thought. An interesting insight is that when you compare the areas and consider the house prices listed on Zoopla, yields are far tighter.
Whilst there is some difference between them, property yields for each area are much more in line. Although the yields are closer together, evidently the appreciation that you will achieve from the areas with the higher prices is likely to be more so that should be considered.
Because of the way a property is divided up to form an HMO, the same exercise is a little harder, however I thought that it would make an interesting comparison!
Investor Take Home Points
Whilst all this data certainly makes for interesting reading, it is important to consider a few take home points as investors should use local data to inform their decisions.
For example, it appears that single let properties in Gillingham or Rochester earn slightly more in monthly rent when it comes to three bedrooms. However, if you look at HMO yields, Chatham and Rochester appear to give you the highest, should you be converting a three-bedroom property. This obviously depends on things such as the property size, layout and ultimately purchase price.
Looking at the data however, it is interesting that Rochester appears to give a higher yield than Gillingham and not entirely sure why this is. It may be that the calculations are based on current listed prices as opposed to the sale prices and therefore the yields here are just an indication rather than an absolute.
Another point to consider is demand. I mentioned above that Gillingham does tend to be an oversaturated market, and this is highlighted by the number of rooms currently available. Factors like this are extremely important for investors as this does not mean Gillingham is a poor area, just that you need to hit a much higher spec to attract the right tenants.
I trust that you found this article insightful and remember that you can book in an in-depth discovery call with me for £147 here. You are also welcome to get in touch with me via LinkedIn and I will be happy to answer any questions that you may have.