Nottingham’s Rental Property Market: What’s In Store?

Nottingham’s Rental Property Market: What’s In Store?

Nottingham’s landlords have enjoyed an almost unprecedented period of growth and prosperity over the past few years. As Nottingham’s leading provider of landlord insurance, we’ve never had it so good. For example, in 2019 the city saw the highest rent increases in the UK with a 5.8% rise versus a national average of 2.6% and it’s been close to the top of the rent rise charts ever since.

The familiar tale of demand exceeding supply as people flock to our growing city has seen rents go up and up. This year things have become even more heated, and we’ve heard first-hand tales of landlords and investors bidding on 10 properties in the hope of securing just one. Even the pandemic, which saw rents in some UK cities fall by as much as 12%, hasn’t dampened the market here. And now with homes reportedly cheaper to rent than buy for the first time since 2014, we could be set for yet another round of increased yields.

Offsetting this boom – or gloom if you’re a prospective tenant – are changes to tax rules, greater regulation, an explosion in new builds and commercial properties being converted to residential use. Could this take some of the heat out of the market and bring rental yields down? Coversure Nottingham’s founder and landlord insurance expert Paul Hartle looks at the changing face of the city’s rental landscape and foresees plenty of change, but also plenty of opportunities.

Nottingham’s Changing Rental Property Market

Nottingham’s rental property market is changing again. The last change came in the wake of the tax relief changes of 2016 which saw a lot of hobbyist buy-to-let landlords sell up and look for other investment opportunities. The pandemic has ushered in another period of disruption. According to a Nottingham Building Society report from last year, nationwide 20% of buy-to-let landlords were considering selling up. They cited falling rents – especially in London and the South East – increased regulation and a further erosion of tax breaks as their primary reasons for exiting.

We’ve seen this change here too with the situation being exacerbated by the Council’s proposal to increase its houses in multiple occupation (HMO) licensing fee. The prospect of having to pass on rises of 5% or more a month was the straw that broke the camel’s back, and with sale prices soaring exiting seemed like a good idea to many.

From a market perspective this could have been bad news for landlords and tenants. A flood of properties coming to market for sale could cut the overall rental supply making competition for properties even higher and sending rents up.

Fortunately, there are enough professional landlords in the city and they hace swooped on anything that comes up. As we mentioned above, professional landlords are making offers on multiple properties in order to secure what they can. Their view – one I tend to share – is that there is still long-term value for landlords given the city’s demographic and the ongoing shortage of stock. The rental landscape here is changing. It’s becoming the domain of the professional landlord with a portfolio of properties which should help raise standards for tenants and add stability.

Prices Still Rising

The pandemic has taken all sectors of the property market on a rollercoaster ride. The initial lockdown made viewing and moving almost impossible so transactions ground to a halt. When lockdown lifted and the stamp duty holiday came in to force there was a stampede for property the likes of which we’ve not seen since the late 1980s. Nottingham has seen property sale prices rise by 7.55% in the last year according to Zoopla, leaving them a staggering 25% up on five years ago. While this is great news for property owners it’s left many first-time buyers priced out of the market leaving them with no choice but to rent.

Nationally there are signs that boom is at least slowing. House prices dipped 0.5% in June as the stamp duty holiday began to be phased out, according to the Halifax. The authors were quick to point out that demand is still strong and that as the economy continues to improve so demand will continue to grow. Stamp duty of 5% for properties from £250,000 to £925,000 is now in place and rates will return to normal in October. This means the point homebuyers start paying stamp duty will revert back to £125,001. For those looking to get on the ladder things look set to get harder and renting may remain their only option.

Ever Increasing Demand

Our city has enjoyed significant population growth over the past two decades. The lure of our outstanding universities and burgeoning digital and creative sectors have swelled the total population from 676,000 in 2001 to 794,000 today and its predicted to rise to 870,000 by 2030 according to the U.N. Much of this influx is people aged between 18-34, the demographic that is most likely to rent rather than buy. This means that even if we can build more homes to keep pace with this growth, there will be plenty of renters for landlords for years to come.

What Can Solve Nottingham’s Housing Crisis?

Conversion To Bring Relief?

While rising rents are good for landlords, they do present a problem to the city as a whole. London’s property boom meant thousands of key workers couldn’t afford homes and people under 30 found it impossible to get on the ladder without the bank of mum and dad. Such issues make places less attractive to work in and leads to problems with recruitment and growth. Nottingham’s shortage of properties is well known. In 2018 the Council received 4,800 requests for housing, 1,300 of which were still open in late 2019 leaving a total of 9,000 people on the waiting list.

Something radical needs to be done and a radical solution may have been gifted to us by, of all things, the pandemic. The pandemic gave online shopping a massive boost. Online retail sales grew by 46% in 2020, continuing a long-term trend toward online over traditional retail. As any commercial landlord will tell you, renting shops isn’t an easy proposition and many are looking to change their usage from commercial to residential. John Lewis recently announced their intention to build 7,000 new rental properties on former store sites. The old post office building in Nottingham is being converted in to flats and a number of our commercial landlord insurance clients are planning to develop similar projects. This, plus the Council’s intention to take over unoccupied homes, might just keep the balance between supply and demand in place so that everybody wins.

Nottingham’s Rental Property Market: What’s In Store?

From my conversations with landlords and property investors, I’d say that what’s in store for Nottingham’s rental market is growth and change. It will grow as the city continues to expand and it will change in terms of the housing stock, the type of landlords we have and the length of rental contracts which, if the trend for renting to be cheaper than buying continues, will lengthen. Like so much in our city, there remains an exciting opportunity here.

Paul Hartle
Managing Director
Coversure Nottingham

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