Shortage of homes to let means rents reach record highs across much of Britain
A shortage of homes available to rent coupled with strong demand from tenants has led to record asking rents in all areas across Britain except Scotland and the North East of England, the latest lettings index shows.
Asking rents outside London have reached a peak of £828 per calendar month, the biggest quarterly jump in rents at this time of year since 2015, according to the data from property portal Rightmove.
Meanwhile, in London rents are at a record of £2,104 per calendar month, the biggest quarterly jump at this time of year since Rightmove started recording this data.
Overall asking rents, excluding London, increased by 3.2% year on year and by 1.3% quarter on quarter while in London they were up 5.6% on an annual basis and up 2.2% on a quarterly basis, the highest since 2016.
Scotland and the North East are the only regional markets not to have seen record asking rents this quarter. In Scotland rents increased 2.1% year on year to £707 but fell by 1% quarter on quarter. In the North East they were up 2.1% year on year and up just 0.6% quarter on quarter to £570.
Nationally, the number of available rental properties is 13% below the previous low recorded in the third quarter of 2015, and 24% down in London, as tax changes deter new and existing landlords.
Indeed, new research from Rightmove shows almost a quarter of landlords, some 24%, are planning to sell at least one property from their current portfolio despite record asking rents. Of these, 13% say they will be decreasing their portfolio and 11% say they will be selling all of their rental properties.
The most common reasons given for selling up are the changes to legislation including the recent tax relief changes and the ban on tenant fees leading to an increase in their costs for some.
The average landlord in the study rents out three properties, with a quarter of them owning just one. However, 30% are still planning to increase their portfolio, with the majority of those saying that property still delivers better returns than other investments.
‘There are a number of forces at play in the current rental market, all leading to record rents for tenants and fewer homes to choose from, yet demand remains strong. There are signs that the stock shortage may worsen if some landlords follow through with their plans to sell up,’ said Rightmove’s commercial director and housing market analyst Miles Shipside.
‘Although an increase in plans for build to rent properties may help to fill some of the gap, the overall feeling among those landlords who are planning to exit the market is one of frustration with many telling us that the tax changes mean it’s no longer financially attractive to keep their properties,’ he explained.
‘Early data seems to point to some of the income lost through the removal of tenant fees being passed on to the tenant in higher rents, but it should still work out cheaper than paying the upfront admin fees as long as stock doesn’t constrict and rents don’t rise too much. What we really need now is more properties available to rent. Rising rents may tempt some landlords back in, but momentum is currently to downsize portfolios in spite of the prospect of increasing yields,’ he added.
Alex Harrington, lettings managing director at Dexters in London, revealed that there is heightened demand overall in London, and the firm has found homes for 19% more tenants this year and achieved significant increases in average rents for new tenancies.
‘London’s tenants are having to act quickly to secure the best lettings properties with people jumping in wherever they see good location, good value or both. We are noticing particularly high demand from corporate tenants and we are handling over 200 such enquiries every week,’ he said.
Increases to stamp duty along with ever increasing and more onerous legislation and compliance on buy to let landlords has resulted in many private and accidental landlords exiting the market or looking for cheaper ways to let their property, according to Clynton Nel, director at Johns & Co.
‘This has had a knock on impact on tenants insofar as fewer rental properties means higher rents. Having said that, in the London new build sector, the buy to let market is still active with seasoned investors,’ he explained.
‘We know of some investors who bought just prior to the referendum a few years ago who today are supplementing their investment with their cash each month as it is simply unprofitable right now. They don’t wish to exit because they may not yet have the gains they would want, but they see the opportunity in the longer term,’ he added.
Carrie Alliston, group lettings director of Hunters, believes that landlords are more discerning if purchasing buy to let property because they have to be, and some have pulled out of the market as finances continue to bite due to various tax implications and the myriad new regulations which affect their bottom line.
‘The current climate means that landlords are increasingly seeking far greater protection from agents. Guaranteed rents, ARLA trained staff, technology advancements and regulatory advice are really important tools for landlords at the moment if they are to continue providing a good service to the housing market,’ she pointed out.