Long gone are the days when the London property market was the place all property investors really wanted to be. Now, London is stagnating while the old industrial workhorse of the North West has been reinvented and reinvigorated as the Northern Powerhouse and its property market is powering ahead at full steam, attracting investors from far and wide with the prospect of capital gains and excellent rental yields. Manchester based property investment firm Hopwood House are predicting that rents will not only continue to increase, but soar.
Continued growth and regeneration fuels demand for rental property
Up until the beginning of the Northern Powerhouse initiative, the North West often saw its brightest young people more or less forced to head south for career opportunities. Now, not only do young people from the North West have more options to develop their career near their childhood homes, family and friends, but young people from other parts of the UK (and indeed overseas), are increasingly moving to the North West to benefit from the high standard of living and lower cost of housing, both rental and purchased.
Obviously, any location with very youthful demographics is likely to have a high demand for rental property and so it is hardly a surprise that the North West (with its many universities and extensive digital economy) has become a hub of new-build property development and the redevelopment of existing properties as it works to match the demand from the growing population, especially the growing population of younger people.
"The influx of young professionals choosing to work and live in the North West has been the source of organic growth in house prices and rental yields seen in recent years."
Regulatory changes may see rents adjusted in response to a new legal framework
There are two regulatory changes on the cards which may see rents having to be raised to compensate for their impact on landlords’ costs. The first is the proposal to mandate minimum three-year tenancy terms. Unless there is a mechanism for landlords to increase rents during the course of the tenancy, then it seems entirely feasible that they will feel the need to front-load rents to ensure that their investment remains financially viable if the tenant stays in place over the long term.
The second change is the proposed ban on letting agent fees. In theory, this second change could lead to a reduction in rents, if it results in investors choosing to self-manage their portfolio instead of using lettings agents. In reality, however, it’s highly questionable whether even local landlords would go down this route, ironically enough, because of government regulation.
These days, lettings agents don’t just manage tenants; they also manage compliance with the law and hence keep landlords safe from the severe penalties which can be applied to them if they breach it, even unknowingly and without causing any harm. It is therefore entirely possible that instead of paying fees to letting agents up front, tenants will simply find themselves paying higher rents over the course of a tenancy.
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