Written By Em

Rental stock reached a record high in December, according to the latest Private Rented Sector Report from ARLA Propertymark (the Association of Residential Letting Agents).

Supply of rental stock

The number of properties letting agents managed rose from an average of 192 per branch in November, to 200 in December – the highest level of rental stock since records began.

This is 6% higher than in December 2016, when agents managed an average of 188 properties.

Rent prices

The percentage of tenants experiencing rent price increases remained at 16% in December – the same number as November, when it dropped to the lowest level since records began in January 2015.

In line with this, the amount of tenants successfully negotiating rent reductions decreased from 3% in November to 2.6% in December, indicating a seasonal slowdown in the number of contract negotiations.

Rental property demand 

Demand for rental properties rose marginally in December, from an average of 58 prospective tenants registered per branch in November, to 59.

David Cox, the Chief Executive of ARLA Propertymark, comments on the report: “London is officially the most expensive city to rent a property in Europe, according to recent data from ECA International. This could be due to the fact letting agents in the capital are only managing an average of 130 properties – 35% lower than the national average and the lowest level in the country. We need to tackle housing stock to reverse this and stop seeing rents increasing for tenants. The cost of living is already rising at an unsustainable rate and, with the added pressures of rising rent costs, the dream of homeownership falls out of reach for many, even with the Government cutting Stamp Duty for first time buyers.

“However, it’s positive that we finished the year with the number of properties available for tenants at a record high. Here’s to a positive year for renters; cheaper rents, good living standards and a rental market which works for everyone.”

The average rent in England and Wales reached £850 per month in December – up by 2.2% over the year – led by gains in the East of England, according to the latest England & Wales Rental Tracker from Your Move.

Rent price growth in the East of England, which contains many rural locations, commuter towns and major cities, including Cambridge and Norwich, outstripped all other regions in 2017, standing at an average of 3.3% in December alone. The average rent in the region now stands at £893 per month – up from £864 in December 2016.

Sue Maher, the Branch Manager of Your Move in Peterborough, comments on the new figures: “We are seeing a large shift in commuting patterns, as tenants look to relocate away from London to towns like Peterborough and Norwich, who are attracting a wide range of employers.

“The City Hospital in Peterborough, for example, attracts many doctors and nurses to the area, and local business parks house the offices of Travelex, Thomas Cook, Mastercard and Amazon, to name a few.”

She adds: “As a result, these areas are predominately rented by young working professionals and families, rather than students or older residents.”

Other areas recording strong annual rent price growth in December were the East Midlands, where the average rent increased by 2.8% to £651 per month, and the North West, which experienced a 2.7% average rise, to hit £635.

In both London and the North East, rents have dropped over the past 12 months.

The yields achieved by landlords remained unchanged in December, with the typical rental return across England and Wales standing at 4.4%.

Martyn Alderton, the National Lettings Director at Your Move and Reeds Rains, says: “The rental market in England and Wales ended 2017 on a positive note for landlords, with rents, overall, up 2.3% compared to a year ago, and average yields across the country now at 4.4%.

“However, behind these figures lie fluctuations, particularly in relation to the fall in average rents in London and strong growth in average rents in other regions.”

Landlords in the North East continue to enjoy the highest average yields, at 5.0%.

At the other end of the scale, properties in London delivered the lowest average yield, at just 3.2% in December.

Alderton believes: “In many ways, the rebalancing of the rental market across the country should be seen as a good thing, as demand spreads to other areas and keeps the market robust.

“London still remains one of the most popular and expensive places to rent, yet we are now seeing strong growth in demand for rental properties in the regions around the capital.”

How do your yields compare to those reported by Your Move?

During the Autumn Budget 2017, the Government announced plans to consult on incentives for landlords to offer longer-term tenancies to those that want them. However, how will these plans affect the thriving short-term lettings market in London?

The boom in short-term lettings sites, such as Airbnb, over the last few years has led to concerns within the private rental sector that tenants are no longer being offered long-term, secure tenancies.

With some landlords noticing that they could potentially earn more by offering their properties as short-term or holiday lets, some are taking their investments off the traditional, long-term rental market.

As such, the Government is concerned that tenants aren’t being offered enough choice, especially in the capital, or the chance to secure a long-term tenancy, which is likely to make them feel more comfortable and protected in their rental home.

In response to these concerns, the Government will consult on ways to overcome the barriers that landlords can face in offering longer, more secure tenancies to those that want them.

But what does this mean for landlords, their tenants and the flourishing short-term lettings market?

Robert Nichols, the CEO of London estate agent Portico, gives his thoughts: “With potential Government changes to longer-term tenancies, there will still remain break clauses to give those tenants the opportunity to move if they need to do so, but, overall, we may see the average tenancy in London increase.

“However, the short let market in London is driven by many different factors and, quite often, through circumstances such as people working abroad for a short period of time or taking a short career break, which is unlikely to change. With the restriction in London of 90 days in place, the short let market is not a realistic alternative to landlords who want to rent their property out full time.”

Is this proof that there is still need for the short-term lettings market, particularly in London?

Nichols explains how it works for property owners: “The growth in rental through sites such as Airbnb has been significant and continues to grow. This is primarily driven by those people who do not want to permanently let their property and want to use their property in London occasionally themselves. Some are also using the Airbnb site for occasional use for their primary residence, while they are on holiday.”

Portico’s short-term lettings service, Portico Host, has helped many landlords and property owners make the most of their investments: “With Portico Host, we have a whole range of customers who use Airbnb for different reasons to maximise the potential revenue from their property and, for landlords, it is often just a short-term solution to ensure there is not a void period between tenancies.”

With potential changes on the horizon, the short-term lettings market could take a hit. Would you be more inclined to stick to the traditional, longer-term rental sector if the Government offered you incentives, or are short-term lets proving more lucrative for you?