Average rents in Britain increased by 5.75% year on year in the first quarter of 2017 to £770 although there is some regional variation, according to the latest index figures.
Some areas of the South East reported slight falls in rent and other areas, such as the East Midlands and Yorkshire saw increases of over 7% year on year in the first three months of the year compared with the same period in 2016.
The rental index from lettings agents Belvoir is based on average advertised monthly rents, which are obtained from property portal Rightmove and since it began in 2008 rents have moved broadly in line with wages and large movements over and above 5% rarely happen.
According to Belvoir chief operating officer Dorian Gonsalves there are several reasons for rental increases of over 7%. He said that they have been pushed up by a rise in HMOs and some Belvoir offices experienced an increase in premium properties, which can affect the data. For example, if the majority of an agent’s properties rent at £600 per month, and they take on a premium property at £2,200 per month, this impacts on the average.
‘Interestingly, a new, non-statistical trend has been observed. Belvoir offices are reporting a large rise in areas with low availability of properties, particularly in market towns. This is down to a lack of new landlords bringing new stock to the market, which we believe is directly related to recent tax increases such as the 3% stamp duty on buy to let homes and changes to the way mortgage interest tax relief is treated,’ Gonsalves explained.
‘As a result of this stock shortage, properties are often rented to the highest bidder, typically the wealthier tenant, which is raising rents beyond the traditional 4% to 5% plus or minus trend,’ he added.
Belvoir has found that the average number of offices seeing landlords add six to10 properties has fallen from 15% in the second quarter of 2016 to 10.9% an d the number of landlords selling property has also fallen. Gonsalves suggests that there has been a fall in new landlords entering the market but no big sell off by current landlords.
Belvoir offices reported that 43% of tenants are staying between 13 to 18 months, 29% are renting for 19 to 24 months and 18.2% are renting for over two years.
The report also shows that average void periods seem to currently be on the increase with more properties, some 60%, taking up to two weeks to let whereas less are being let within a week, suggesting a slight slowdown in tenant demand.
However, despite increases in rents in some regions, rent arrears are not increasing, and Gonsalves said this suggests that tenants are currently coping with landlord rent rises.
Looking ahead to the general election outcome, he pointed out that whilst some initiatives may help some tenants, the general view seems to be to ‘curb’ smaller buy to let investors in favour of large landlords.
‘This could cause a further decrease in stock levels, making it much tougher for tenants to secure a property, especially as demand is expected to continue to increase over the coming years,’ he explained.
‘All parties are promising an increase in the building of new homes, but the reality is that unless land is sold or developed at a discount, it will be quite difficult to provide rents at anything less than existing landlords are doing. This is already the case in London where large landlords, who are backed by the Government, or Housing Associations and are now entering into the private rented sector can make renting viable at existing market rents,’ he added.