Buy to Let in Derby. It’s all about Supply and Demand

I had a lot of enquiries and conversations following my recent article about the state of the Derby Property market and in particular what had happened to rents in Derby since 2008. If you recall, I said that rents in Derby are still 4.68% lower than they were in 2008. One particular Derby landlord rang me after reading the Derby Property Blog wanting to know more of the story of what was happening to rents in the City. The reason he asked was that his current agent hadn’t increased his rent for a number of years and he was questioning whether he was getting the best return from his buy to let investment.

The Derby rental market is all about supply and demand - isn’t it so in all parts of the economy? On the supply side, 565 rental properties have come up for let in the last 31 days in Derby. It sounds a lot doesn’t it until you consider there are 15,943 rental properties in Derby, that means only 3.54% of the rental stock of properties in Derby is coming onto the market and it is normally around 5%.  One reason for this lack of new rental properties coming on the market is the fact that tenants seem to be staying in properties longer.

With this lack of supply, newer tenants have to pay more to secure the property they want. This is the crux of the matter.. properties they want. Older properties in Derby, that haven’t been maintained, still retain their wood chip wallpaper from the 1970’s and thread bare carpets have seen their rents drop. Tenants want either modern properties with all the mod cons or older style properties that have been presented to an exceptional standard – and, generally, they are prepared to pay for the privilege. Rents for top quality properties in Derby have risen by 0.4% in the last month. Any properties, old or modern, put on the market in good or excellent condition will rent in a matter of a few days.

  

Interestingly, looking at Derby property values, the Land Registry has just released it’s latest set of data on property values. Throughout April 2015, the latest set of data, property values remained static in Derby, with 0% growth, meaning they are now 3.3% higher than they were a year ago.  When one looks at the regional picture, the East Midlands average property values rose by 1.4% in the last month. The difference doesn’t concern me, as the regional and local property values always even themselves out over the months.

 

Looking forward, after considering all the statistics and talking to other property professionals, I expect property values in Derby to rise by 3% to 5% over the coming 12 months, following the Election result.  In a forthcoming article, I will discuss how the number of properties changing hands each month has dropped considerably in the last 10 to 15 years in the City.

..and so back to my chat with the landlord.. Each property is unique and so, as his tenancy agreement allows him to inspect the property with notice to the tenant, we will be visiting the property next week!

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