A landlord of mine from Australia, who is always keen to buy more buy to let properties, emailed me last week to say that he was concerned that he had missed the boat by not buying a property before 1 April this year. There was a surge of people buying buy to let properties before 1 April when the Scottish Government brought in the additional 3% Land & Buildings Transactions Tax (Scottish Stamp Duty) on second homes (a buy to let property is generally classified as a second home) and my landlord was concerned that this ‘flood’ of new properties would over supply the market meaning it wasn’t worth him buying another buy to let property for years.
My immediate response was to repeat my often said mantra of ‘the demand for rental properties over the next 20 year + will be very strong’ so, whilst there may have be a short term over supply around 1 April this year, the future for renting is strong.
However, it got me thinking that it would be good if I could back up this mantra with figures to provide more comfort. So I have done this.
There are currently 37,472 properties in Midlothian. The Midlothian Annual Housing Land Audit shows that 4,286 properties are due to be built by 2021 meaning that by 2021 there will be 41,758 properties in Midlothian.
62.5% of properties in Midlothian are currently owned, 26.7% are Council/social rented, 1% are rent free and the remaining 9.8% are private rented.
We know that home ownership is coming down and we know that there are not that many Council/social properties being built. According to Sheffield University, buy to let landlords will continue fuelling the growth of the private rented sector in the coming decades. By their estimates (and they are considered a centre of excellence on the topic), the rate of homeownership nationally will fall to 50% (today it is 62.5% in Penicuik) by 2032, while the rate of private sector renting will increase to 35% (interestingly, in Penicuik it stands at 9.8% today).
I estimate that by 2021 home ownership will fall to 60%, Council/social rented and rent free will remain the same at 26.7% and 1% respectively which would mean that private rented would increase to 12.3%.
This would mean that by 2021 there would be 5,136 private rented properties which is a 39% increase from the current level of 3,961.
Therefore, whilst there may have been a wee glut of properties on the rental market around 1 April of this year, the medium to longer term outlook for the rental property market is good. My overseas landlord was comforted by this, so much so in fact that tomorrow I am viewing the buy to let property on Cranston Street, Penicuik that I blogged about last week for him!
If you would like to explore how we can help you with your property investments, or should you require any advice about investing in the Penicuik property market, wish to enquire about our Investment Analysis Reports, Property Sourcing, Residential Lettings or Property Management services, please do not hesitate to contact me on 01968 674601 or at email@example.com or pop into the office at 6 Bank Street for a chat.