A fall in the supply of rental properties ahead of the introduction of energy efficiency standards for homes could push rent costs higher in 2018, says Arla Propertymark.
Figures from its February survey show one in five (20%) tenants recorded rent increases, which is slightly higher than the 19% in January but significantly lower than a year earlier when 25% of tenants experienced a rent hike.
The supply of rental properties fell by 5% in February, however, with 175 on average per branch compared with 184 in January, according to Arla Propertymark. This is the lowest level since May 2016, when the figure stood at 171. Supply was highest in Scotland at 254 properties per branch, while London saw the lowest supply of just 128 properties per branch.
David Cox, chief executive at Arla Propertymark, says: “This month’s results continue to show a drop in the supply of rental properties and this is no surprise; the minimum energy efficiency standards came into effect in April, meaning all rental properties must be EPC rated E or above.
"The dip in supply indicates that landlords are cutting it fine and taking their properties off the market to make the necessary changes – but we could also see up to 300,000 properties taken off [after 1 April 2018] because they don’t reach the minimum requirements. This is also likely to push rent costs up as competition heats up among prospective tenants. We could have a supply crisis on our hands, and for landlords who haven’t yet started to upgrade their properties now is the time to act and fast.”
Under the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 from April 2018, landlords of privately rented domestic and non-domestic property in England or Wales must ensure that their properties reach at least an Energy Performance Certificate (EPC) rating of E before granting a new tenancy to new or existing tenants. These requirements will then apply to all private rented properties in England and Wales – even where there has been no change in tenancy arrangements – from 1 April 2020 for domestic properties, and from 1 April 2023 for non-domestic properties.
Key stats at a glance:
· ARLA Propertymark February Private Rented Sector Report – 20% of tenants experienced rent hikes.
· Countrywide Monthly Lettings Index – rents up by 2.1% over the year to February 2018.
· HomeLet Rental Index – UK rents up by 1.2% over the year to February 2018.
· Office for National Statistics (ONS) Index of Private Housing Rental Prices for December – UK rents up by 1.1% over the year to February 2018.
· Your Move England & Wales Rental Tracker March report (February data) – average rent in England and Wales up by 3%.
· Rightmove Rental Trends Tracker Q1 – UK rents outside Greater London increased by 0.9% year on year, while rents within Greater London fell 0.1%.
Scotland rents move higher
Rental growth across the UK moved higher in February, according to HomeLet Rental index, with rents increasing in 10 of the 12 regions covered by the data. Scotland recorded the highest year-on-year increase of 5.5% with average rents increasing from £597 in February 2017 to £632 a year later. In contrast Wales saw a fall in rents of 1.5% from £602 a month to £593 in February 2018.
Overall the average rent across the UK rose by 1.2% to reach an average monthly rent of £906, while London rents rose by 1.1% in February to reach an average of £1537 a month, HomeLet data reveals. Average rental growth excluding London, however, increased 1.6% to £758 per month.
London growth continues
Countrywide’s Monthly Lettings Index reports rental growth slowed to 2.1% in February down from 2.4% the previous month, although growth was supported by higher rents in London. It says London grew faster in February – at 3.1% – than any other region for the third month in a row to reach an average rent of £1,686 a month. The figures suggest the average cost of a new let in the UK increased to £954 a month in February, although overall the annual rental growth across the country slowed to 1.5% – down from 2.4% in January.
Johnny Morris, research director at Countrywide, says: “London continues to see the greatest falls in the stock of available homes to rent, on the back of reduced investor activity; this scarcity of supply is driving rental growth.”
East Midlands rents rise 2.6%
Meanwhile, the Rightmove Rental Trends Tracker for the first quarter of 2018 shows asking rents for all property types outside of Greater London increased by 0.9% year on year, compared with an 0.7% increase in the fourth quarter of 2017. London rents, however, saw a fall of 0.1% in the first three months, compared with a rise of 1.2% at the end of last year.
The strongest performing region on an annual basis is the East Midlands, which has seen rents increase by 2.6%, according to Rightmove, while the South East has seen rents fall by 0.9% on an annual basis.
Miles Shipside, Rightmove’s housing market analyst, says: “A look at the first few months of this year shows the usual seasonal trend of asking rents falling slightly compared to the last quarter of last year, but we’re likely see a rise again next quarter. London asking rents remain flat compared to this time last year – a sign that we are highly unlikely to see the same big increases over the next 10 years that we’ve seen in some areas in the capital over the previous 10 years.”
The East Midlands and the East of England were highlighted by Your Move’s England and Wales Rental Tracker as the two strongest performing regions in February with rents increasing by 2.9%. The East of England has an average monthly rent of £894 - the highest outside of London - while the East Midlands average rent sits at £652 a month. Eight of the 10 regions recorded an increase in rents, with only London and the North East seeing prices drop – by 0.3% and 2% respectively.
The Office of National Statistics (ONS), meanwhile, shows rents in the UK increased 1.1% in the 12 months to February 2018, unchanged from the previous month, which is a slowdown since the end of 2015. In England private rental prices increased by 1.1%, compared with 1.4% in Wales and just 0.4% in Scotland for the 12 months to February 2018.
ARLA Propertymark January Private Rented Sector (PRS) Report – research carried out in an online survey among 356 ARLA member branches from 6th – 14th March 2018.
Countrywide Lettings Index – rent and rental growth figures for each month are based on a three-month rolling average rather than lets agreed in the past month. The index is based on the 90,000 homes let and managed by Countrywide in each year, adjusting for their location and type. It is based on achieved rather than advertised rents and the published monthly rental figures are an average of the new lets and renewals of tenancies over a rolling three-month period.
HomeLet Rental Index – The index and average prices are produced using HomeLet’s mix adjusted rental index methodology. Data is gathered from its tenant referencing service, and our rental amounts are based on actual achieved rental prices with accurate tenancy start dates in a reported month, rather than advertised costs.
ONS Index of Private Housing Rental Prices – an experimental price index tracking the prices paid for renting property from private landlords in Great Britain.
Your Move England & Wales Rental Tracker – based on analysis of approximately 20,000 Your Move properties across England and Wales.
Rightmove’s Rental Trends Tracker - compiled from the asking rents of properties coming onto the market on Rightmove.co.uk. and produced from factual data of actual asking prices of rental properties currently on the market. For quarterly data Rightmove measured 311,027 asking rents. The properties were advertised on Rightmove.co.uk by agents from 1st January - 22nd March 2018.