London rents fall lower as regional cities rise

London rents have fallen for the fourth month in a row, but markets across the UK are still seeing rates rise.

Rental inflation in the capital is now -0.6 per cent a year, according to the July HomeLet Rental Index. Wwhile the pace of decline is now slowing – July’s figure compares to a 2.9 per cent drop in June – the capital’s rental market “still looks transformed compared to this time last year”, saus Homelet, when rents were rising at a rate of 6.6 per cent.

The Greater London rental property market continues to act as a brake on the UK as a whole, though, as rental growth outside of London is notably stronger: nine out of 11 regions beyond the capital seeing higher rents last month.

Rents rose fastest in Northern Ireland (up 5.7 per cent compared to July 2016) and Scotland (3.6 per cent), with only the South East (-0.9 per cent) and the North East (-1.7 per cent) recording declines. As a result, rental price inflation across the UK excluding London is now running at 1.6 per cent.

HomeLet’s data suggests landlords now feel more confident than in the Spring about seeking higher rents on their properties – but also that they remain very aware of tenants’ ability to pay. The July data may also reflect a decrease in the number of homes coming onto the rental market, with research from organisations such as the Association of Residential Letting Agents suggesting fewer landlords have acquired new rental properties in recent months.

According to ARLA’s data, the number of letting agents who saw landlords increasing rent costs for tenants remained at 31 per cent in July, unchanged from June and up from 27 per cent in May. In comparison, in July 2016, only 28 per cent of agents saw rents increase.

David Cox, ARLA Propertymark Chief Executive, says: “Landlords really are stuck between a rock and a hard place. All the tax increases they’ve incurred over the last 18 months have meant they either need to sell their properties and exit the market, or increase rent payments to plug the deficit. Neither of these outcomes benefit tenants; if they exit the market, supply is even more strained and matched with growing demand, rent prices will increase anyway. Government may claim they are helping tenants but the unintended consequences of their actions on the private rental sector are now really being felt by tenants in terms of lack of homes to choose from and the feeling of being constantly priced out of the market. This needs to change.”


London rents fall for first time in eight years

8th May 2017

Rents in London have fallen for the first time in eight years.

Rents have been rising at a more modest pace across the whole of the UK in recent months, and with landlords facing tax changes that will push up their costs, rates are expected to keep growing. However, while some research has reported a marked slowdown in buy-to-let activity, other research has found that landlords are trying to hold off on raising rents for tenants where possible.

In April, according to HomeLet, rental price inflation across the UK reduced to its lowest level for seven years. Rents in the capital, meanwhile, were actually 1.2 per cent lower in April than in the same month of last year, the first time average rents have fallen on an annual basis since December 2009.

This negative growth in the capital, along with a marginal decline in the wider South-East England region, pushed rental price inflation down across the country as a whole. Rents on new tenancies signed across the UK during April were on average just 0.4 per cent higher than in the same month in 2016.

April’s rental price inflation means tenants signing up to a new tenancy last month agreed to pay an average rent of £904 a month, or £754, excluding Greater London. In London itself, the average rent now stands at £1,519.

“We continue to see landlords’ and letting agents weighing tenant affordability considerations very seriously,” comments HomeLet’s Chief Executive Officer, Martin Totty.


London rent hikes slow, bucking national trend

24th March 2017

London rental growth is slowing, even though the national trend shows no sign of stopping.

Rental costs in London are increasing at a much slower rate than the rest of the country, according to the Association of Residential Letting Agents’ latest report, with only 8 per cent of agents in the capital saying rents went up in February.

Nationally, the private rented sector continues to see rents increase, with 25 per cent of agents on average saying rents increased last month. Indeed, nationally, the supply of rental stock decreased in February, while demand stayed the same as in January.

David Cox, ARLA Propertymark Chief Executive, says: “The fact that rent prices in London are bucking the national trend is a positive sign for both renters and prospective renters in the Capital. However, this isn’t being seen across the rest of the country, as the national average for the number of agents reporting rent hikes rings alarm bells. While London’s results indicate a step in the right direction, it must be taken with a pinch of salt. With the imminent withdrawal of mortgage interest relief and the Government’s decision to ban letting agent fees will more than likely have the opposite effect on rental costs across the country if an out-right ban is imposed. The costs of the services provided by letting agents will need to be recouped and will inevitably be passed onto renters through increased rent.”


Demand for rental accommodation up 10pc

24th February 2017

Demand for rental accommodation has risen 10 per cent in the last year.

The latest ARLA Propertymark (Association of Residential Letting Agents) report shows that in January, there were 34 prospective tenants registered per member branch, up 31 per cent from December, and 31 tenants registered, up 10 per cent on January 2015.

The supply of rental homes managed per branch climbed from 188 to 193, but that was not enough to keep up with the climbing need for accommodation. As a result, almost a quarter (23 per cent) of agents saw tenants experiencing rent hikes in January.

David Cox, ARLA Propertymark Chief Executive, says: “As expected, the New Year brought with it a flurry of activity in the rental market. While supply of rental stock rose slightly, the number of prospective tenants increased by a much bigger margin. When supply and demand are out of kilter, as they have been for so long now, the market isn’t balanced and fair for tenants, and rent prices will just continue to rise. Worse still, should the Government decide to implement an out-right ban on letting agent fees when the consultation takes place, the situation will likely get worse for tenants. The costs of the vital services letting agent fees cover will need to be recouped, and this will get passed on to renters in inflated rental prices. This, combined with new landlords’ tax, particularly the upcoming changes to mortgage interest release, means the rental market is far from reaching equilibrium.”


Landlords look outside of London for stronger returns

20th January 2017

Landlords are looking outside of London for stronger returns, as tenant demand within the capital shows signs of cooling.

New research from the National Landlords Association shows that the number of landlords in London reporting a rise in tenant demand over the past quarter has slipped almost 30 percentage points when compared to the same point last year – down to 17 per cent from 45 per cent. The findings also show that 40 per cent of landlords in the South East report a rise in tenant demand over the past quarter – the highest reported across the UK – indicating that tenants are increasingly looking to move out of the city to more affordable suburbs.

The perceived drop in rental demand in central London coincides with a more conservative approach from landlords to purchasing property in the capital in the coming months. Just 5 per cent of landlords who operate in London say they plan to purchase more properties in the next quarter, the lowest across all regions and down from 15 per cent this time last year.

In contrast, the proportion of landlords operating in the North East who plan to buy in the next three months has almost doubled – up from 10 per cent this time last year to 19 per cent. The proportion of landlords in Yorkshire looking to buy has also jumped significantly from 10 per cent this time last year to 16 per cent this quarter.

Carolyn Uphill, Chairman of the NLA, says: “It looks like central London is simply becoming too expensive for most people, regardless of whether you want to buy, invest or rent. For many tenants the practical solution of moving out of the city to more affordable suburbs with good transport links is becoming increasingly appealing. In turn, it seems that landlords have been quick to respond, turning their backs on the capital and looking to other areas where the upfront cost of acquiring property is lower, and the potential yields to be had are higher.”


Tenant demand to remain “robust” in 2017

9th January 2017

Demand from tenants for rented accommodation will remain “robust” in 2017, as landlords prepare to raise rents.

The UK buy-to-let market has had a rough ride in the last year and the market is only set to get bumpier as 2017 unfolds. After the stamp duty surcharge on second home purchases last year, April 2017 sees the start of the government’s plan to phase out mortgage interest tax relief for landlords, leaving buy-to-let investors paying tax on revenue rather than profit and pushing many into higher tax brackets. Letting agent fees will also be banned for tenants, which means that landlords are likely to have a higher cost to meet there too.

As a result, they have little choice but to raise rents. Indeed, last year already saw rents begin to rise, as investors prepared to offset these new costs with higher income.

The good news for investors, to some degree, is that tenants are not going anyway in the near future, due the country’s ongoing housing shortage.

“Demand for rented accommodation will remain robust, as the myriad threats of rising house prices, falling real incomes and rising inflation affect the ability of aspiring homeowners to get their foot on the housing ladder and save for a deposit,” says John Goodall, CEO and founder of Landbay, in the company’s latest report.

According to Landbay’s research, outside the capital, rents continued to grow across the country in 2016, a trend that is forecast to continue in the coming year. The average rent for UK property outside London reached the £750/month milestone in December 2016, up 2.04 per cent from the start of the year. Rental payments now account for over half (53 per cent) of the average take-home pay for people living outside the capital (£1,425).

Average rents across all property sizes grew by 2.13 per cent in England (excluding London), 1.42 per cent in Scotland and 1.43 per cent in Wales in 2016, rising to £755, £721 and £634 respectively by the end of the year.

With consumer inflation set to rise to 2.7 per cent in 2017, house prices continuing to climb and low interest rates restricting the ability to save for a deposit, the findings raise fresh concerns about the affordability of the housing market for aspiring homeowners.

“The government may have just committed £7 billion to building an additional 200,000 affordable starter homes, but supply across all tenures is still too low,” adds Goodall. “The buy-to-let market has become a catch-all for a forgotten generation of house hunters, for those who cannot, or choose not to, buy a property outright.”

The report follows research from the Association of Residential Letting Agents, which found that eight in 10 letting agents expect rents to climb in 2017, following a seasonal dip for the Christmas period.

David Cox, Managing Director of ARLA, comments: “The number of rent hikes reported by letting agents continued to decrease in November 2016, and it’s a shame the ban on letting agent fees will have the opposite impact on rent prices when the measure comes into force.”


Demand from UK tenants hits 20-month high

31st October 2016

Demand from UK tenants has hit a 20-month high in the UK, according to new research.

Figures from the Association of Residential Letting Agents paint a positive picture for landlords, with demand from prospective tenants climbing to the highest level since February 2015.

In September, letting agents had 40 prospective tenants registered on average per branch. Demand in the East of England and London sat much higher than the national average, with 45 prospective tenants registered per branch. Compared to the rest of the UK, demand remained the lowest in Northern Ireland.

Nonetheless, supply has improved, says ARLA, with the average number of properties managed per branch rising from 183 to 193 in September. The number of properties registered per branch was lowest in London where agents managed an average of 119 properties per branch. However, this is significantly higher than the 97 reported in London in August.

With the number of agents reporting landlords selling their BTL properties unchanged since April, the figures suggest that the buy-to-let sector is being less affected by the Brexit vote and its ensuing uncertainty than some initially feared.

David Cox, Managing Director of ARLA, comments: “This month’s findings paint a really positive picture for renters. Although demand is rising, we’ve seen this happen gradually over the course of the year, and would expect it to slow again in line with seasonal trends over the next few months. On the other hand, the supply of rental stock has risen astronomically, which suggest it’s not quite right that landlords are pulling out of the market as a result of Brexit. This is supported in our findings, which reveal the number of landlords selling their buy-to-let properties hasn’t changed since April, when three landlords were selling up per branch.”


Good news for landlords, as rents climb steadily

7th September 2016

Rents continued to climb across the UK this summer, providing good news for landlords at a time when the recent Brexit vote looms large over the market.

Fears that the vote to leave the European Union would see house prices plunge and investors depart do not appear to have impacted the buy-to-let sector, which has also been facing the future headwind of costly mortgage relief tax changes by the government.

Read: Should landlords incorporate to avoid the new Tenant Tax?

According to the latest HomeLet Rental Index, rents continued their trend of climbing steadily throughout the year in August 2016, with tenants signing up to a new tenancy last month agreeing to pay an average rent of £913 a month, a 3.1 per cent increase on the same month of 2015. 11 out of the 12 regions surveyed recorded an increase over the year to the end of August.

The pace of rent rises, while sustainable, is moderating. The 3.1 per cent recorded in August is comparable to annual increases of between 3.5 and 3.8 per cent over the previous four months. By contrast, annual rental inflation was running at close to 6 per cent this time last year.

Nevertheless, HomeLet’s regional trend analysis suggests that rental inflation has been more variable in certain areas of the country than others. London and the South-East saw a larger dip in the pace of rent rises during March and April this year, at a time when buy-to-let investors were purchasing properties in larger numbers ahead of higher stamp duty rates that came into force at the beginning of the 2016-17 tax year.

Martin Totty, Barbon Insurance Group’s Chief Executive Officer, says: “The latest HomeLet Rental Index reflects a private rental market in which landlords are engaged in a delicate balancing act: they’re acutely aware of tenants’ concerns about affordability while also conscious of the need to achieve their target yields against a backdrop of rising costs. August’s figures suggest that rents are continuing to rise at a sustainable pace – ahead of price inflation, but well below house price increases, which were running at close to 6 per cent according to the most recent data.

“In the medium to longer term, the fundamental driver of rents will be the balance between demand and supply for rented property. We expect demand in the private rental sector to continue to grow, in line with demographic changes such as population growth.”

The index has also bee August’s HomeLet Rental Index is the first to be published following a redesign of the benchmark, which is the most comprehensive and widely-followed index of the way in which rents are changing in the UK’s private rental sector.

UK rental home supply hits 2016 high

2nd September 2016

Supply of UK rental homes has hit a high for the year, painting a positive picture for prospective tenants post-Brexit.

The number of rental properties on letting agents’ books was 184 in July, up 5 per cent month-on-month and the highest number seen so far in 2016 – despite a slight dip of 3 per cent year-on-year.

Demand from prospective tenants for rental accommodation fell slightly, from 37 house-hunters per branch in June, to 36 in July. However, in July, the majority of agents reported no change to rent prices, supply of properties and demand from tenants following the Brexit vote. Seven in 10 agents witnessed no change in rents, and six in 10 saw no movement in supply and demand.

The figures are welcomed by David Cox, Managing Director of the Association of Residential Letting Agents, as a reassuring sign of normality for the private rented sector.

“Supply is up, as we’d expect at this time of year, and the number of tenants experiencing rent hikes hasn’t changed in three months. While we obviously need new houses to balance the growing gap between supply and demand, what’s positive is that the situation isn’t worsening as a direct result of June’s Brexit result,” he comments.

Indeed, 38 per cent of letting agents saw no sign of market wobble following Brexit. Where there is uncertainty though, it comes from those looking to let properties, with 44 per cent of agents reporting signs of uncertainty from landlords

“Despite reports that the housing market is spiralling out of control post-Brexit, our results paint a very different picture, and indicate that the future is bright for the rental market,” adds Cox.

Landlords reassure EU tenants that Brexit will not leave them homeless

15th August 2016

Landlords are reassuring EU tenants that the UK’s vote to leave the European Union will not mean that they have nowhere to live.

New research shows that 3 in 10 EU tenants are worried the referendum result will make it harder for them to rent a home in the UK, with one in four worried that landlords will be less willing to rent to them.

The poll of almost 1,000 renters found that 18 per cent of private renters –approximately 2 million people – are EU citizens who currently have the right to freedom of movement within the EU. However, there are concerns about whether or not EU citizens will be able to remain in the UK if the right to freedom of movement is removed or restricted during the process.

Richard Lambert, Chief Executive Officer at the NLA, though, is reassuring them that this is not the case and that business is continuing as normal.

“There is still a great deal of uncertainty surrounding the referendum, but we want to reassure European citizens living in the UK it’s simply not the case that landlords will stop letting to them just because the country has decided to leave the EU,” he comments.

“However, if the right to freedom of movement within the EU is curtailed during the exit negotiations, then landlords may have no other option than to end tenancies rather than facing fines and even jail time if they let property to someone without the legal right to remain in the UK.”

For the moment, though, the rental market has continued to show signs of normality, despite the Brexit vote, with rents up in July, according to HomeLet.

UK rental market continues to grow in aftermath of Brexit

9th August 2016

It may be too early to tell how the Brexit vote will impact the UK’s buy-to-let sector, but the rental market is still showing signs of growth.

The latest HomeLet Rental Index data shows that rents continued to climb in July 2016, with rents agreed on new tenancies across the UK (excluding London) over the three months to the end of July up by 2.3 per cent, compared to the same period in 2015. In the capital, meanwhile, rents were 4 per cent higher.

The data suggests that landlords have been able to continue securing higher rents on new tenancies, despite the economic uncertainties created by the UK’s vote to leave the European Union in June, says HomeLet. Indeed, it mirrors data from the housing market, with mortgage lenders also reporting modest growth in house prices in the month following the Brexit vote, although many agree that is still too early to measure what affect Brexit sentiment has had on the market. While house price growth is slowing, meanwhile, rental growth is also showing continued signs of cooling.

Commenting on the report, Martin Totty, Barbon Insurance Group’s Chief Executive Officer, says: “Ultimately, rents will be determined by supply and demand in the private rental sector; what we know here is that population growth will continue to increase demand, and that the housing stock isn’t growing quickly enough to meet that demand.”

“We won’t know exactly how Brexit is impacting the private rental sector and it will be several months yet until we see some clearly established trends in the marketplace,” he adds. It seems likely that with lenders concerned about the prospect of falling house prices, loans to value in the mortgage market are going to become less generous, which may see more people turn to the rental sector rather than buying a property. However, it’s possible we may also see renewed interest in the London rental market as foreign investors seek to pick up investment property to make the most of the big exchange rate advantage following the fall in the pound. We may also see foreign investment increase outside the capital, in other cities across the UK.”


UK rental market remains stable post-Brexit

26th July 2016

The UK rental market has remained stable in the immediate aftermath of the vote to leave the European Union.

The EU referendum’s result came as a surprise to many, with the pound plummeting to a three-decade low against the US dollar. Property experts, though, have rallied to reassure buyers, sellers and investors that even as negotiations continue for the UK’s new relationship with the EU, the fundamentals of the country’s housing market remain the same: people need homes and there are not enough of them.

That sentiment is echoed in the first figures from the Association of Residential Letting Agents since the result, with data for June showing that Brexit has not rocked the rental market yet; while 12 per cent of agents reported an immediate dip in rent, an overwhelming three quarters saw no change. This contradicts expectations, as prior to the result, a fifth (19 per cent) predicted rents would increase, and a fifth (20 per cent) expected them to fall.

Similarly, the supply of available properties and demand for housing remained the same immediately following the result. Almost one in seven (67 per cent) ARLA members reported no change in supply, and a further 64 per cent reported no change in the number of prospective tenants looking for properties.

Indeed, month on month, demand for rental accommodation was up in June overall, as was the supply of properties managed on letting agents’ books. There were 37 prospective tenants on average registered per ARLA member branch in June, up 12 per cent from 33 in May. The supply of rental properties rose by 3 per cent in June, from 171 in May to 176 properties on agents’ books this month.

However, since the result, almost half (45 per cent) of letting agents have witnessed uncertainty from landlords looking to let properties, which could cause waves in the rental market over the coming months.

David Cox, managing director, Association of Residential Letting Agents says: “The rental market has responded to Brexit in a calm fashion, with no immediate fallout amid extreme political and economic uncertainty. What we need is some certainty from the new Government that housing remains a priority with the rental market playing a central. For example, we want to avoid a situation where institutional investors start pulling away from the market because ultimately this will impact tenants by squeezing supply further and pushing up rents.”