In Derby, why don’t people buy instead of rent? It’s not just raising the deposit..

Quite often, when talking about the rental market, we talk about property and seem to  forget the other party in the equation, tenants.

Without tenants, there is no demand for the rental property. The profile of the Derby tenant has changed and continues to change. Although this is in part due to the credit crunch, job mobility and the raising of deposits, an increased number of people in their twenties are choosing to rent rather than buy and have done so, even when they were in a position when they could have bought a property.

Since the credit crunch, rents have been good value for money for most tenants outside London. Few rents (outside London) have kept pace with inflation as they tend to track wage inflation. In 2008, the average median gross wage according to Office of National Statistics in Derby was £22,900. Latest figures for Derby in 2014 show average salaries in the City had risen to £25,905, an increase of 13.1%.

I was reading some research from the Bank of England which suggests with regards to inflation, goods and services that cost £100 in 2008 would cost £119 in 2014, making inflation 19% over those seven years.

Derby tenants are paying less than both wage and goods inflation. Derby rents are in fact still around 4.2% below the level being achieved in 2008 but the tenants are being paid 13.1% more. That is why we have seen a greater demand for Derby rental properties with more and more people becoming tenants. So renting has since the credit crunch, on average, delivered good value for money for tenants and hence the healthy demand and lack of void periods for most property.

Overall, considering the recent rises in property prices over the last 12 months, we are still 7% below the 2007 boom prices in Derby. With reasonable rents, many would-be first time buyers in Derby have been wise to remain in the private rental sector.

Rents tend to move in line with wages as opposed to inflation and if something goes wrong with the property, inevitably landlords pick up the bill, so tenants aren't hit with awful expenditure surprises as a normal home owner would be.

In addition, renting offers better mobility both from a location perspective, but also from a trading up or down perspective in terms of rent commitment which, in this tough job market, could be considered a wise move. From the landlords point of view, the consequence of this philosophy is a steady, solid market throughout the Derby area, with good tenant demand, decent long term capital growth (as mentioned in last week's article) and average yields between 4 and 7%.

With home owners it used to be buy, sell, buy, sell as one rose up the property ladder.. Now it’s buy, hold, buy, hold.

If you would like to arrange a FREE RENTAL VALUATION then click HERE.
If you would like to see our selection of Investment Properties for Sale, then click HERE.

Call me at our office on: 01332 366171 or visit the website: www.pplets.co.uk