The rental market is an example of supply and demand at work.
If you were to look at the rents being charged 10 years ago, it’s fair to say that they will be a lot less than those being charged today. In common with virtually everything else, over a period of time, the costs associated with renting inevitably rise, but over a much shorter period this won’t necessarily be the case.
The rental market is an example of supply and demand in possibly one of its purest forms. If there are no 3 bed semis to be had in the whole of Hampshire, then there’s a very good chance that a landlord will be able to expect a hefty increase in income were he to have such a property available at the right time.
By the same token, however, if Hampshire is awash with those properties, then the same landlord is not in such a strong position.
Anyone looking for a 3 bed semi who is faced with pages and pages of these on Rightmove and Zoopla will undoubtedly take his time to seek out the nicest possible examples, offering as many shiny things as possible. He’ll go for the new gas central heating with a combi-boiler. He’ll look for the conservatory and garage. He’ll take the en-suite which is offered by some. He’ll take the new carpets and recently redecorated one over those which are tired.
More to the point, he’ll also be looking for the most sensibly priced that he can find and the landlord who was expecting to get an extra £25 or so simply because it was let for less last time is quite probably in for a shock.
Quite rightly, the standards in the rental sector have improved over the years. Gone are the days when a tenant would be grateful simply to have a roof over his head. There are a growing number of landlords offering far better accommodation and the better tenants understand this and have expectations.
Those tenants who can be checked and referenced, which agents should able to offer, will not be prepared to spend an extra £25 just because a landlord deems it an appropriate rent.
The property which has had an increase in rent on the whim of the landlord is very likely to sit empty for some while. The more properties out there, the longer it will stay empty. A property isn’t being marketed in isolation; it is in direct competition with whatever else is out there at the time and sometimes landlords forget that.
There’s a pretty good chance that this landlord has also neglected the basic refurbishment requirements of the property. Were he to have put in new carpets and decorated or taken care of other maintenance issues then his property, although possibly still not worth the extra rent, would appear higher up the list of desirable properties. It may not have the garage, the en-suite or the new boiler, but it could easily be a very presentable example of that type of property.
Of course, it may be that a landlord isn’t financially in a position to carry out the works which are required. But exactly how well off will he be financially if he has an empty property and possibly a mortgage and other costs associated with ownership with no rent coming in?
I see examples of this on an almost weekly basis and the folly is all too easy to demonstrate. If, for example, a property is realistically valued at £925, but a landlord wants £950 and as a result it takes an extra 6 weeks to let it, or more often than not, the landlord continues to try for the higher rent for 6 weeks before reducing it to the more realistic rent, then the landlord has lost around £1350 in income. There are 54 months at £25 in £1350 and this is how long it will take the landlord to get back to where he would have been if he had simply accepted that rents sometimes fall.
One of the most recent examples of this that I have come across involved a property bought off plan and over-valued by another agent to the tune of £50. (£1050 rather than £1000.) It stood empty for three months, meaning that the landlord lost £3000. That’s 60 months at £50 a month.
Sometimes, events conspire in our favour; maybe someone comes down from Aberdeen or London where they are used to paying huge rents and they are happy to swallow what a local would regard as being excessive. But sometimes, events conspire against us and those tenants go elsewhere and all we have to choose from are switched-on tenants who appreciate that the market is under-going an adjustment and that there are a few bargains to be had.
My advice it to conduct some research on Rightmove before deciding to hold out for top dollar in rent. Speak to a number of agents and ask them to be realistic. Find those agents who have let agreed boards up and who are advertising properties as being let on Rightmove.
Take a detailed look at the photographs online and be brutally honest with yourself; is your property really as good or better than those which are the same price or lower than yours? And, while you’re at it, how many others are available?
Agents aren’t working against the landlord. After all, unless a property is tenanted, an agent hasn’t made any money on the deal; we work to our mutual benefit.
Unless a landlord has a very significant portfolio, the chances are that the agent has more in his portfolio and the agent is valuing and letting far more properties on a continual basis. He will likely have many properties similar to that which this landlord has over-priced. There is every chance that he knows what he is talking about and his advice ought to be sound.
Certainly, if a landlord asks a number of agents, he’ll get a consensus and if that consensus is that a landlord shouldn’t expect a higher rent this time without some improvement work, then he would be wise to think about it.
If you’d like to have a chat about the rental market in and around Basingstoke or Winchester, feel free to call us, email us, drop in or send a private message on Facebook.