Rental prices across the UK rose again in March as lack of housing supply helps to maintain strong demand for properties.
Key stats at a glance:
- ARLA Propertymark March Private Rented Sector Report – 23% of tenants experienced rent hikes
- Countrywide Monthly Lettings Index – rents up 1.7% over the year to March 2018.
- HomeLet Rental Index – UK rents up by 1.1% over the year to March 2018.
- Office for National Statistics (ONS) Index of Private Housing Rental Prices – UK rents up by 1.1% over the year to March 2018.
- Your Move England & Wales Rental Tracker March report – average rent in England and Wales up by 3.2% over the past year.
Lack of housing supply continues to drive prices higher for renters. Some 23% of tenants saw their rent rise in March – the highest level since September. It’s not putting people off though – the number of renters looking for a property climbed 8% in the month, according to the latest ARLA Propertymark Private Rented Sector report.
Estate agents now each have an average of 66 prospective tenants registered. While property supply has increased from 175 properties per lettings branch in February to 179 in March, it is down from 183 a year ago.
It is thought that rising rents are being driven by landlords trying to recoup the costs incurred by recent legislation changes.
The Royal Institution of Chartered Surveyors (RICS) thinks prices will carry on rising this year as the number of new instructions from landlords continue to dwindle.
Figures from the Office for National Statistics show tenants saw their rental prices rise by 1.1% in the 12 months to March 2018.
The ONS Index of Private Housing Rental Prices (measures the change in private renting pricing.
It reveals that rents in Wales grew at a faster rate than those of England and Scotland over the year to March – up 1.2%. Rents in Scotland grew 0.7% and in England 1.1%. Rental growth was considerably slower in London. It was, up just 0.1% over the year, compared to 2.7% in the East Midlands and 2.1% in the South West of the country.
Crossrail sparks rent rise
The Homelet Rental Index shows rents across the UK climbed by 0.9% in March to an average of £912.
It says rents in the capital leapt by 1.5% over the past year to an average of £1,569. With London excluded, overall rents across the nation were up 1.1% over the year to an average of £759, rising in 10 of 12 UK regions. The North East saw the greatest drop in prices, with rents down 2.1% over the past month alone.
The figures indicate a slowing down of rent rises – in 2016 they climbed 4% in the first half of the year alone.
Martin Totty, chief executive of HomeLet, says: “The data show the sensitivity of the rental market to factors other than simply location. Last year, for example, we saw rents in the areas surrounding the commuter belt to the south of the capital rise during a spate of rail strikes.
“The rate of growth has now slowed as the strikes have ended. However, in the first quarter of 2018, rents in the central and eastern regions of London rose, which coincides with Crossrail nearing completion and suggests commutability into London has a real-time impact on the rental market.”
Landlords revamp properties to boost rents
A slowing in rent rises could be encouraging landlords to revamp their properties to ensure they are attractive to tenants. A record number of landlords are re-mortgaging their properties to fund home improvements.
According to the Countrywide Monthly Lettings Index, 5.6% of landlords who re-mortgaged plan to use the money for home improvements. Some 9,523 landlords remortgaging their buy-to-let over the past 12 months are planning on home improvements – up from just 2,967 the year before.
DIY landlords are most prevalent in the east of the country, with one in 10 releasing cash to do up their property. But London landlords will be spending the most – taking out £35,470 on average, more than three times the amount released by landlords in Yorkshire & the Humber, who withdrew £11,150.
Johnny Morris, research director at Countrywide, says: “The additional transaction costs from the stamp duty changes for second homeowners means more landlords are choosing to invest in their properties, refurbishing and improvement them, and holding on to them for longer to maximise gains.”
The Countrywide Index found the average cost of a new let climbed to £951 in March – up 1.7% from a year ago. The Midlands saw the fastest rental growth, with prices up 2.8% in the year. It was followed by Wales, up 2.1%, and Greater London, up 2.1%. Scotland was the only region to see prices fall.
East Midlands sees rapid rises
The Your Move England & Wales rental tracker also found that rents are growing fastest in the East Midlands. It said overall rents were up 3.2% over the past year to an average of£860 a month.
In the East Midlands, which includes cities such as Derby, Leicester and Nottingham, average rental prices grew to £893 – the second most expensive region in the country, joint with the South East, where rents were up 1.6% over the year.
Rents in the capital remain the highest overall at £1,276 but did not rise in the year. The cheapest rents across the country are in Scotland and the North East – at £536 and £575 respectively.
Rising rental prices appears to be putting tenants under pressure. Worryingly, there was an increase in the proportion of renters in arrears, with 9.1% of tenants behind on payments, up from 8.6% the previous month. The highest proportion recorded was in February 2010 when 14.6% were behind on payments.
Price hikes put pressure on tenants
As rents continue to climb, they are accounting for a greater proportion of tenants’ incomes. The Landbay Rental Index shows that rental payments snow account for some 52% of the average disposable income.
That leaps to 89% for renters in the capital, who spend an average of £1,879 a month on rent, it says.
Those living in the north of the country spend considerably less of their salary on rental payments, with of 41% take-home pay spent on rent in the North East. That compares to 58% in the South East and 55% in the East of England.
John Goodall, chief executive at Landbay, says rising rents makes it harder for those trying to save up for a deposit to buy a home.
“Rents have increased by 9% across the UK since March 2013, and monthly payments remain a burden on those struggling to save. Tenants saving for a house face a triple challenge, with more of their income spent on rent, together with house price inflation and record low interest rates limiting their ability to save,” he says.
Commuter towns fall out of favour
Colchester was ranked the top place to own a buy-to-let in the latest LendInvest BTL Index. It ranks 105 postcode areas around England and Wales based on four factors: capital value growth, transaction volumes, rental yield and rental price growth.
Essex town Colchester climbed to the top of the table, having held second place since September, followed by Northampton and Leicester. Popular Greater London commuter locations slipped in favour, with Dartford dropping to 43rd place in the table and St Albans to 73rd.
Colchester gained top spot after reporting rental yields of 3.7%, capital gains of almost 10%, rental price growth of 3.4% and transaction volume growth of 2.8%.
That compares with bottom of the table Crewe where capital gains were just 1.9% in the year, rental price growth just 0.1% and transaction volume growth 0.9%. Yields in the region were healthy at 3.7%.