Where have Chichester’s rental properties gone?

I’ve been writing these weekly articles and analysing Chichester’s property market for over six years now and never have I seen so few properties available to rent in Chichester. This time last year there was already a relatively low 106 properties seeking new tenants…today there are just 34.

Interestingly, the total number of properties on the market is down just 8% though (173 vs 189 last year) and that’s because the majority of the properties on the market are currently ‘let agreed’ (139 let agreed now vs 83 last year, equating to an increase of 67%).

Basically, rental demand is far outstripping supply. This is pretty evident as soon as you market a property to rent; since lockdown I have received double-digit enquiries within 48 hours of a new listing going live, with properties becoming let agreed within a few days. 

Houses typically perform stronger than flats, but this has accelerated since lockdown. For many who were stuck inside a flat without any private outdoor space and a higher concentration of neighbours, the benefits in a house they could call home became clear. Unfortunately for them, whilst there are 23 flats available to rent (still very low), there are only 11 houses available in the whole of Chichester (four two-beds / six three-beds and a solitary four-bedroom house).

There are a variety of reasons as to this particularly strong demand. Some households are separating after lockdown, whilst others are expanding. Many have had a change of circumstances in work, either in location or flexibility in working from home (which may mean they can move further away from their place of work and/or now require a dedicated space to work at home). And, as mentioned above, there are those wanting to move from a flat to a house.

There is, unfortunately, one scenario that is causing quite a few ‘happy as they were’ tenants to have to find a new home too - their current landlord wants to sell. Unfortunately, Covid-19 has led to many landlords re-evaluating things and concluding that the uncertainty over the future, along with a variety of ‘sticks’ that have been thrown at landlords (summarised as increased legislation, costs and taxation), means they no longer see property as a viable investment.

Ultimately this situation in the imbalance in supply and demand can only lead to a rise in rents. I thought this might be evident already, whilst this purple patch is with us, but it seems there is still caution to the pricing of new rental listings as the average rental figure in Chichester stands at £975pcm, down from £995pcm this time last year. 

IF we should get out the other side of this pandemic relatively unscathed economically (i.e. people largely remain employed) the ability for tenants to pay their rent should not become an issue (any more than the lack of general affordability in Chichester and the UK already is an issue of course!). What will become an issue though is the permanent loss of rental properties as landlords have been spooked (and taxed) into selling. For the landlords that remain, there will be just as many tenants wanting decent accommodation and, as a result, rents could well increase in the long-run.

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   crjlettings.co.uk   clive@crjlettings.co.uk  01243 624 599

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BUY-TO-LET DEAL OF THE WEEK: 3 bed house in Chichester, £280,000, 4.7% yield

Summary:
3 bed house in Chichester
Listed for sale on 28/09/19 @ £325,000
Now = £280,000
Rent = £1,100pcm
Yield = 4.7%

Having been marketed for nearly a year, this three-bedroom house close to Chichester's city centre is now available at a great price. First marketed at £325,000, it has been reduced in price by 14% to bring it to its current asking price of £280,000.

That makes it cheap compared to most three-bedroom houses in Chichester. When you factor in its excellent condition, which will require little or no input to make it a desirable home for tenants, it is as close to being a bargain as properties in Chichester can be.

It is in a popular location for families, being close to the city centre, train station and Chichester High School. The garden is a little smaller than most in the street, but it does benefit from having had the bathroom moved upstairs (although that does make the bedrooms abit smaller), as many of the houses retain the original downstairs bathroom location, which is becoming less acceptable to many.

Due to its great condition, it should quickly let for £1,100pcm, which would equate to a decent 4.7% rental return from this freehold property. One thing just to check is the outer brickwork. The main photo shows a colour difference, which suggests some work may have taken place at some point. I was chatting only the other day to tenants experience shrinkage in a new-build home how the different property types can be affected to different extents i.e. flats & mid-terraces are unlikely to move, whereas end-terraced and detached homes are definitely worth checking as they are obviously more susceptible to movement and external influences, such as the weather.

The property is on the market with Purplebricks and full details can be found on Rightmove via the following link: 

https://www.rightmove.co.uk/property-for-sale/property-74420971.html

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   crjlettings.co.uk   clive@crjlettings.co.uk  01243 624 599

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How quickly will you start receiving rent?

When you first buy a rental property, you need to factor in that you won’t get the keys and instantly start receiving rent (unless you buy with tenants in-situ).

It is likely that you’ll first need to undertake some maintenance or refurbishment to the property. You will also need time to advertise the property, conduct viewings, reference the chosen tenants and complete all of the relevant paperwork and safety checks before finally moving them in and starting to receive some return on your investment.

Being pro-active can help to minimise this initial void period. I try to advertise the property as soon as I am allowed to by the seller, have confirmed the ‘earliest move-in date’ and can take representative photographs that show the property off well. 

Ideally you would conduct viewings at this stage too i.e. between exchange and completion. If that’s not possible, marketing it early still enables you to take prospective tenants names, numbers and details so that once you are in a position to conduct viewings you have a shortlist of interested parties ready to go on day one.

Letting agents or landlords with multiple properties may also have a head-start as they will often have tenants on a waiting list or who ‘missed out’ on a previous property but may find yours of interest.

It is also important to advertise the property at the correct rental price. You may even consider offering the property below the ‘going rate’ so as to attract more interest, rent the property quicker and thus minimise your initial void period on your first let (when the property is earning you nothing). 

Ideally the first batch of viewings will lead to suitable tenants who wish to rent the property. The next issue then becomes when they can move-in. It’s unusual for someone to be able to move-in immediately, as they will typically have a notice period to honour with their current landlord.

Property type can play a part here - smaller properties may be filled quicker as the tenants are naturally of a more transient nature, whereas larger family homes often come with tenants that have more commitments (and stuff to pack!) before they can move.

 In normal circumstances, if a property is advertised and a tenant is not found within a couple of weeks (not necessarily moved in, but scheduled to do so)  then I would say something is wrong - normally the price, property or marketing. One key proviso for a landlord is that the objective should always be to get the best tenants possible, not necessarily the first ones that come along. 

If you are buying a rental property and would like someone to help you find the right tenants as quickly as possible, please get in touch.

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   crjlettings.co.uk   clive@crjlettings.co.uk  01243 624 599

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BUY-TO-LET DEAL OF THE WEEK: 2 bed house in Fishbourne, £259,000, 4.5% yield

Summary:
2 bed house in Fishbourne
Listed for sale on 29/06/20 @ £269,950
Now = £259,000
Rent = £975pcm
Last sold for £191,000 in 2011 (+36% in 9 years)
Yield = 4.5%

There are currently two two-bedroom houses for sale in Mosse Gardens in Fishbourne. Both were originally an identical size and layout internally and yet this one is cheaper (ok, only by £1,000) BUT it also has a conservatory and a garage - which is a real bonus and worth £50pcm additional rent versus a house without.

Originally marketed in June at £269,950, it was reduced to £264,500 in July and has just been reduced to its current asking price of £259,000. Whilst that still doesn't make it a bargain (I'd like to see it at £250,000 for that to be true) it is decent value compared to what else is available, its rental return and previous sales on the street.

It last sold in 2011 for £191,000, meaning achieving the asking price would see a 36% increase in 9 years. Achieving £975pcm rent would now mean a 4.5% rental return, which is decent for a freehold property in good condition when compared to the local average. Two bed houses though, as I have said many times, are in short supply. As such, I believe you can be relatively sure of a continuously strong rental demand from tenants, as well as long-term capital growth for the property itself.

The property is on the market with Bell & Blake and full details can be found on Rightmove via the following link: 

https://www.rightmove.co.uk/property-for-sale/property-94177655.html

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   crjlettings.co.uk   clive@crjlettings.co.uk  01243 624 599

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Housing activity at its strongest for five years

According to the latest Zoopla House Price Index, housing market activity is at its strongest since 2015. This has been driven by pent-up demand and a once-in-a-lifetime re-evaluation of what buyers want from a home in the wake of lockdown. The stamp duty relief, which I suggested at the time probably wasn’t strictly needed, also appears to have added fuel on the fire.

The number of new sales agreed in August on Zoopla is 76% higher than the five-year average. Typically, August is seen as a quiet month for the market as people fly abroad whilst the kids are on Summer holiday. With the majority of those plans in tatters, it seems the typical housing market schedule has shifted too.

Considering the long period of lockdown and ongoing restrictions, not many would have bet on a 34% increase in buyer appetite since the start of 2020 compared to January-August of last year. Fortunately for current prospective buyers, more homes have been coming to the market too, with supply in the previous month up 50% compared to last year.

The bounce in activity is also leading to properties selling quicker than before the pandemic across all regions of the UK. Homes sold since 13^th May took just 27 days to do so, compared to 39 days in the same timeframe last year.

Things aren’t equal in this regard when considering the type of property though. I have long argued that houses are a preferable purchase to flats and this has become clearer to many during the months of lockdown, who now value a private garden more than ever before. As such, houses are selling quicker than flats, with three-bedroom houses the quickest to sell (24 days on average) and two-bedroom houses not far behind (26 days on average). Flats, in comparison, are taking 32 days to sell on average.

The larger houses aren’t sticking around either; with four and five-bedroom houses selling 33% faster than they were a year ago. They used to be the slowest types of properties to sell and yet they are both now selling quicker than flats are. This appears to have been boosted by workers moving from more expensive urban areas in favour of locations further away from work for lifestyle choices, now that many are looking to work from home on an ongoing basis.

Due to a large number of more expensive homes being listed, the average asking price has risen 8% compared to a year ago. House prices haven’t increased though (the annual rate of UK house price growth slowed to 2.5% in July, from 2.7% in June), but the proportion of more expensive homes for sale has. The stamp duty relief is thought to be a key reason for the surge of activity in London and the South-East, as the savings on offer in these areas are greater than average.

It will be interesting to see whether this increased level of activity runs out of steam as schools re-open and the full ramifications of the pandemic’s economic impact becomes clearer. Now in recession, the economy has already contracted sharply and unemployment is rising, although some are hopeful that a strong rebound in consumer spending will soon spread to the wider economy. I suspect October-December will be crunch time, as the furlough schemes end and businesses need to make difficult decisions that will test the strength of any economic recovery and, as a result, how the housing market will fare.

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   crjlettings.co.uk   clive@crjlettings.co.uk  01243 624 599

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