Back in the Spring, there was a surge in Cambridge landlords buying buy to let property in Cambridge as they tried to beat George Osborne’s new stamp duty changes which kicked in on the 1st April 2016. To give you an idea of the sort of numbers we are talking about, below are the property statistics for sales either side of the deadline in CB1.
- Jan 2016 – 53 properties sold
- Feb 2016 – 53 properties sold
- March 2016 – 82 properties sold
- April 2016 – 26 properties sold
- May 2016 – 27 properties sold
Normally, the number of sales in the Spring months is very similar, irrespective of the month. However, as one can see, this year was a completely different picture as landlords moved their purchases forward to beat the stamp duty increase. You would think that even with a basic knowledge of supply and demand economics, rents would be affected in a downwards direction?
However, there appears to be no apparent effect on the levels of rent being asked in Cambridge – and more importantly achieved – and this direction of rents is not likely to inverse any time soon, particularly as legislation planned for 2017 might reduce rental stock and push property values ever upward. The decline of buy to let mortgage interest tax relief will make some properties lossmaking, forcing landlords to pass on costs to tenants in the form of higher rents just to stay afloat. Even those who can still operate may be deterred from making further investments, reducing rental stock at a time of severe property shortage.
…but it’s not all bad news for tenants. Whilst average rents in Cambridge since 2005 have increased by 18.6%, inflation has been 38.5% over the same time frame, meaning Cambridge tenants are 19.9% better off in real terms when it comes to their rent (which is a sizeable chunk of most people’s monthly household budgets)
I found it particularly interesting looking at the rent rises over the last five years in Cambridge, as it was five years ago we started to see the very early green shoots of growth of the Cambridge economy. As a whole, following the Credit crunch (2011), rents in Cambridge have risen by an average of 1.9% a year – fascinating don’t you think?
The view I am trying to portray is that while renting is often portrayed as the unfavorable alternative to home ownership, many young Cambridge professionals like renting as it gives them adaptability with their life. Rents will continue to rise which is good news for landlords as buy to let is an investment but, as can be seen from the statistics, tenants have also had a good deal with below inflation increases in rents in the past. It’s a win-win situation for everyone although on a very personal note, it’s imperative in the future that tenants are not thwarted from saving for a deposit by excessive rental hikes – there has to be a balance.