The Bank of Mum and Dad is helping their kids in the rental market to the tune of £2.3 billion, according to new research.
Key stats at a glance:
- ARLA (Association of Residential Letting Agents) Propertymark’s July Private Rented Sector Report – 31% of landlords saw rent increases, while 2.5% say tenants negotiated a rent reduction.
- HomeLet Rental Index – UK rents up by 1.1% over the year to July 2017.
- Legal & General’s Bank of Mum and Dad report reveals parents pay £415 on average towards their kids’ rent.
- Office for National Statistics (ONS) Index of Private Housing Rental Prices – UK rents up by 1.8% over the year to July 2017.
A report by Legal & General and the Centre for Economics & Business Research (Cebr) reveals that parents will fund £2.3 billion towards rent in 2017, paying out on average £415. The Bank of Mum and Dad now helps 9% of renters in nearly 460,000 properties nationwide.
Dan Batterton, fund manager, Build to Rent at LGIM Real Assets, explains: “Legal & General has been tracking the role of the Bank of Mum and Dad for some years now – but this is the first time we’ve looked at its role in the rental market and the results are concerning. It is a real challenge for young people who are reliant on parental handouts just to make the rent.”
The intergenerational inequality that creates the demand for Bank of Mum and Dad funding continues to widen and now it’s affecting renters too.
He adds: “The lack of affordable housing, low wage growth relative to inflation and burdens of student debt mean that many kids can’t even rent somewhere without significant contributions from their family. Parents want to help their kids get on in life, and the Bank of Mum and Dad is a testament to their generosity, but it is also a symptom of our broken housing market.”
Small rent rise
Parents will, therefore, be relieved to hear that HomeLet’s July Rental Index reports that rents in the UK went up by just 1.1% in July compared to a year ago, with the average monthly rent at £925.
This is the first yearly rental increase for three months – with falls of -0.3% and -0.2% in May and June respectively.
Rents in the UK remain hardly changed from 2016 as a knock-on effect of a slowing rental market in Greater London, where rents were down in July by -0.6% on a year ago.
Meanwhile, nine out of 11 regions outside London report higher rents in July, with rents in Northern Ireland rising the fastest (up 5.7% compared to July 2016), with only the South East (-0.9%) and the North East (-1.7%) recording rents falling.
HomeLet’s chief executive, Martin Totty, says: “Summer is a time when renters contemplate moving, demand increases, tenancy terms are set, and when the anniversary of the tenancy often occurs. This year, that ‘seasonal’ factor brings some relief for landlords, who’ve endured a gradual erosion in rent prices over many months.
“At the same stage last year, the South East was the main driver of UK average rents. This time around it’s regions throughout the country leading the strengthening in rents. If we exclude the London region, the average UK rent for a private rental property has hit a new high of £769 a month, up 1.6% on this time last year.”
Rental growth remains unchanged
The Office for National Statistics (ONS) Index of private housing rental prices in Great Britain for July 2017 reported that rents went up annually by 1.8%, which means there has been no change since April. A property rented out in June 2016 for £500 would now cost tenants £509 a month.
Like last month, it says that a slowdown in rental growth is driven by rents hardly rising in London, where they have gone up by 1.5% in the 12 months to July 2017.
In England, rents went up by 1.9%, while Wales saw growth of 1.3% and Scotland witnessed a 0.2% increase.
Tenants ‘priced out of the market’
ARLA Propertymark (Association of Residential Letting Agents) reveals in its July Private Rented Sector report that the number of letting agents who reported that landlords had put up the rent was 31% – the same as in June. However, 2.5% of agents polled said that tenants successfully negotiated a reduction in rent. The number of properties managed by each branch also is going up – from 184 in July 2016 to 192 a year later.
The number of new tenants has also risen – up from 61 in June to 70 in July 2017.
David Cox, chief executive of ARLA Propertymark, says: “Landlords really are stuck between a rock and a hard place. All the tax increases they’ve incurred over the past 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. The unintended consequences of government 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.”
ARLA Propertymark’s Private Rented Sector Report – online survey of 240 ARLA member estate agents between 2 and 11 August 2017.
HomeLet Rental Index - Provides data on new tenancies in the UK. As part of referencing prospective tenants each year, HomeLet processes information including the rental amounts agreed, the number of tenants moving into the property, together with the employment status, income and age of all tenants.
Legal & General Bank of Mum and Dad Report – survey of over 1,000 UK adults in February 2017, with analysis by the Centre for Economics & Business Research of this poll and other UK housing data.
ONS Index of Private Housing Rental Prices - An experimental price index tracking the prices paid for renting property from private landlords in Great Britain.