What does the future hold for the Cambridge rental market?

RAH Blog
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24 April 2018
by Redmayne Arnold and Harris

The Cambridge rental market is seen as very buoyant, a place where rents increase and demand always outweighs supply. Is this still the case?

Over the past 10 years, buy-to-let investors have flocked to Cambridge in the expectation of strong rents and impressive capital growth, driven by huge tenant demand and lack of supply.  However, while rents have remained strong over the past year, we have seen a slow down in the rates of capital appreciation.  Investors chasing a fast buck are likely to be disappointed. This doesn’t mean the Cambridge BTL market is broken, it just means a short-term investment strategy is no longer a viable option.

According to the most recent Home Track report (February 2018) values in Cambridge have dropped 1.5% year on year, but will this have an affect on the rental market? In the immediate short term, likely not, but if this becomes and ongoing trend, those property owners considering selling up, may hold off until prices see an increase. This in turn will affect the stock of properties to purchase, possible pushing people to rent until they find their ‘dream home’ but also pushing buy to let investors in purchasing while prices are down.

The average rent in the East of England, at the end of 2017 was £909pcm, in Cambridge this was £1202pcm (Landbay, Rental Index Report). Cambridge is still a microclimate, offering a unique setting for the housing market. So why does Cambridge stand out and what part do Landlords need to play in keeping these rents at this level?

Over the next three years, around two million sq ft of office and laboratory developments will be delivered in the Cambridge market. This is on top of the multinational companies, such as Astrazeneca, Google, and Microsoft who have already called Cambridge their home.

The increased investment in infrastructure is also increasing the rental demand as more areas of the City become popular for commuters; such as the Cambridge North train station, improvements to A14 between Cambridge and Huntington and proposed plans for a Cambridge South train station.

New developments such as Ninewells and Eddington, together with some impressive high spec refurbishments of existing stock has improved the overall standard of properties in Cambridge. Older properties can start looking more dated in comparison to the newer developments so keeping up with maintenance is key. Larger companies in the City are attracting affluent young professionals and families who expect their homes to be well-presented and maintenance free in exchange for the high rents they are being asked to pay. Landlords must keep up with these expectations to ensure the strong rents continue. As Letting Agents, we need to ensure our clients' property stands out from others on the market, giving the best possible chance of achieving the expected rent level, with a minimum void period.

Looking ahead, we expect clearer answers to the key questions. Will the changes to stamp duty for first time buyers reduce the young professional renters or the length in which they rent? Will the changes with tax relief on mortgage payments reduce the buy to let investors and therefore rental stock, ultimately leading to an underpinning of rental prices as supply drops but demand remains steady? Will the uncertainty with Brexit hold people back in buying and push them to rent until the landscape is more certain? Only time will tell, but what we do know is the Cambridge market continues to need supply to meet the demand. This supply just needs to be of a higher standard, to meet the increased expectations of tenants.

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