Last month I observed that the supply of properties coming onto the Sunderland rental market had the expected post-Easter boost, but without a corresponding increase in the number of tenants searching for properties. Looking at the June figures this trend appears to be continuing but further analysis throws up some interesting data suggesting Investors should think again about SR6...
As always, the available property stats I've used are pulled from Rightmove data & given Rightmove is the most popular site, whilst this doesn't include Zoopla, OnTheMarket etc it would be fair to expect Rightmove trends to reflect the wider market
Looking at the above table, there has been a 9% increase in available property since May (which itself was up 17% on March)
It's widely accepted within the industry that at any given time 5% of the total rental stock should be available to rent, so based on the above, with only 4.1% of the 10,572 total rental properties in Sunderland being available to rent, even with the 9% increase there is still a shortfall
Everywhere but SR1 shows a shortfall - the SR1 figure will skew the overall shortfall figure significantly
But is it an issue that fewer than the expected 5% of properties are currently on the market to rent?
Simple economics dictates that it's the relationship between demand and supply that determines the health of a market, so let's turn our attention to tenant demand
As I mentioned on previous posts this is not an exact science as whilst Rightmove allows analysis of tenant searches to be further broken down by named area, it doesn't do so on a postcode basis, so the following table isn't going to exactly match the postcodes on the Supply table above, but it should be pretty close...
Immediately you'll notice that there were 19% fewer Rightmove area specific searches carried out by tenants in June compared to May (and you may recall that I observed that anecdotally May "felt" quiet on the tenant front)
This is a slight concern, however experience tells us that the busiest months for tenants looking for properties are July, August and September so we would expect a very different situation when we look again next month
Recalling my economics degree from decades ago, having a situation of reduced demand is not the worst thing in the world if it is also matched by correspondingly restricted supply, markets tend to operate better where there is near equilibrium between supply and demand - it leads to more predictability than having massive shortages or surpluses
That said, from a Landlords point of view moderate shortfall in the availability of properties with healthy demand may open the door to rent increases not seen in Sunderland for many years...and the above figures suggest that the market would not support any increases at the moment
I thought it may be interesting to break the above figures down further to show the areas that are receiving the greatest number of searches - it makes interesting reading and some of the results may be surprising to you!
The first thing that immediately strikes me is that 4 of the top 10 tenant area specific search areas are within SR6, which is not traditionally seen as the best place to buy an investment property in Sunderland
Taking the top performing Roker aside (as this is the more affordable end of SR6), Seaburn, Fulwell and Cleadon are the more expensive areas that don't tend to offer as good Yields as elsewhere in Sunderland, so tend to be overlooked by Landlords & Investors
The above information would indicate to me that a rethink may be required to tap into the clear demand for rental properties in the above areas
The fundamental barriers to investors buying in the more expensive SR6 areas will be cost and the knock-on effect it will have on Yield (as rents are typically higher than elsewhere in SR6...but not that much higher) but the better areas of SR6 have traditionally delivered better capital growth potential than elsewhere in Sunderland
It's also worth looking back at the first table to note that SR6 has the second fewest rental properties out of any Sunderland postcode area (only the City Centre has fewer), suggesting that when matched with the strong demand a good rental property in this area is likely to be popular
I would also suggest given the type of tenant willing & able to pay more for a Seaburn, Fulwell or Cleadon property and also the property type & size, you are more likely to attract longer term tenants
It may be that consideration of the above leads investors who have the means to do so to diversify and develop a more balanced portfolio by including SR6 properties to tap into the strong demand in addition to properties delivering great Yields elsewhere in Sunderland
If you'd like to chat about anything this analysis has highlighted or any aspect of the Sunderland property market please call me on 0191 567 8577 or email firstname.lastname@example.org