As we begin moving further into the second half of 2022, I’ve been reading up about the latest rental property statistics and was pleasantly surprised to see the Medway market coming out second in the country for rental growth rates.
Check this table below that highlights current rental growth hotspots. You will see how Chatham has been beaten by only Manchester, as Chatham has hit an annual change of just over 21%.
This kind of rental growth is the highest I’ve ever known, and it really does serve to highlight how attractive the Medway Towns are becoming. But what are the driving factors of this change and what are the long-term consequences for investors (and tenants)?
What I have also found interesting is that ME5 has also experienced the largest growth in property prices in the Medway Towns at 14.82% over the past three years. Clearly, considering the record rental and house price growth, Chatham is becoming an increasingly desirable area! I suspect this influx has largely come from people moving out of areas closer to the city.
Driving Change Factors
The first, probably relatively obvious factor, is the effects of the Government’s war on landlords showing an impact. With many landlords selling up due to the legislative changes, this means there are less properties available to rent, pouring fuel on the existing housing crisis.
The effect of this is that available rental stock is down 26% compared to a year ago (whereas demand is up by 6%) and tenants are now needing to plan 6-10 weeks in advance rather than 4-6 weeks.
Chew on this fact, however. Monthly rental rates are around 40% higher than a decade ago, whereas mortgage payments are around 13% higher!
Ironically, it appears that policies such as the stamp duty holiday led to a surge in prices and with the cost-of-living crisis having taken hold leading to rising mortgage rates and more cautious lenders, mortgage affordability will undoubtedly have (or be taking) a knock.
It’s important to remember that the housing market is driven by supply and demand, so in the current situation where demand is high, and supply is low there will inevitably be higher rental rates as a result.
Whether it is a driving factor or not, rental yields seem to have pretty much kept pace with house price growth. Perhaps a question to be asked is the part mortgage lenders are having in rents keeping pace with house price growth when it comes to yields?
Whilst this is positive news for investors, I fully acknowledge it is less than ideal for renters, many of whom will be trying to save hard to get on the housing ladder themselves. There are several schemes out there, but whether they are up to the job is a question certainly needing to be asked.
Impact For Investors
When it comes to investors, one immediate impact of this sky-high demand is clearly higher rental rates as highlighted above.
Higher rental rates generally mean increased profits and despite the challenges such as looming EPC legislation and more, the property market has continued to maintain its manta of being robust over an extended period of time.
With this in mind, I found it interesting to read how around 34% of landlords are planning to expand their portfolios over the coming 12 months compared to just 11% who are looking to reduce. This, if anything, is a positive sign of future potential!
What is also clear is that whilst the current cost of living crisis is going to present an increased hurdle to home ownership, it serves to demonstrate the need for quality rental housing.
I completely acknowledge the challenge this presents to people looking to purchase their first home and, in my view, it is the job of landlords to provide quality accommodation (whether HMO or single let) that serves the long-term needs of families and individuals.
What of the Medway market? Things look like they’re growing in desirability and with the increased development activity along with the record rental rate increases in Chatham there are signs of strong future potential.
I’d be keen to hear your thoughts! The best way to get in touch is via LinkedIn.