Growing trend of renting second homes

13 July 2018

An interesting trend reported by Hamptons is the rise of people renting second homes. With the extra 3% stamp duty on buying an additional home, it seems that renting a bolthole in London or a weekend retreat in the countryside works out cheaper than buying.

Meanwhile, rental growth continues to slow in London, while tenants in regions such as south-west England and the East Midlands have seen rents go up. There remains a “chronic supply shortage” in the numbef properties available to rent. 

Key stats at a glance: 

ARLA Propertymark May Private Rented Sector Report– Rental stock rises but so do rents, up by 28%.

Hamptons International Monthly Lettings Index– Highest number of rented second homes on record in 2017

HomeLet Rental Index– UK rents up by 2% over the year to April 2018

Office for National Statistics (ONS) May Index of Private Housing Rental Prices– Rents rise in Wales but fall in London for the first time since 2010

Your Move England & Wales Rental Tracker May report– Regional rents rising faster than London

Rent rises and housing shortages

The Hamptons International Lettings Index reported that 13,680 British properties were rented as second homes in 2017 – 136% more than in 2007, when there were just 5,800, and 11% up from the previous year.The number of rented second homes has been rising since 2007, when estate agents Hamptons started collecting the data.

The average rent of a second home is £1,060 per calendar month, which is 24% more than the average rent of a primary home. The South West has the highest proportion of rented second homes, followed by Scotland and London. In the capital, the average second home rent rises to £2,030 per calendar month, reflecting the popularity of renting a city pied-à-terre. 

Six out of the top 10 second home rental hotspots are in the South West or South East. Windsor & Maidenhead tops the list, with 14% of rental homes let as second homes, followed by the more rural south-west locations Gloucester (11%) and Tewkesbury (6%). 

The average cost of new lets rose to £953 per calendar month in May, up 1.3% year on year, a smaller rise than the 1.9% seen in April. Rents fell in the North for the second consecutive month, and increased by only 0.9% in London. 

Aneisha Beveridge, analyst at Hamptons, comments: “The additional stamp duty surcharge on second home purchases introduced in April 2016, increased buyers’ upfront costs and resulted in more people deciding to rent a second home rather than buy.

“The places second-home renters are choosing include a mix of town and country. Second home rental hotspots reflect today’s lifestyle choices from the pied-à-terre in towns and cities, close to work, schools and all the amenities that city life has to offer, to rural and coastal locations perfect for escaping the trappings of a busy urban life.

“Average rents rose in seven out of eight regions in May on the back of fewer homes being available to rent than last year. Rents in the North fell for the second consecutive month, meanwhile rental growth remained strong in Wales, the East and the Midlands.”

HomeLet Rental Index shows rent rises in London…

The number of rental properties managed by letting agents increased by 4% in May over the previous month, the highest rise so far this year, according to the Association of Rental Letting Agents (ARLA). 

Despite this apparent increase in available housing stock, the number of tenants experiencing rent hikes also rose. In May, 28% of tenants saw their rents rise, up from 26% in April and the highest rise since August 2017. 

At the same time, the number of tenants looking for new homes fell by 16% over the previous month, the lowest level of demand since December 2017. The number of landlords selling their buy-to-let properties and exiting the market remained at a high of 5% in May.

David Cox, chief executive of ARLA, commented on the availability of rental properties: “There’s a chronic supply shortage in the rental market at the moment, and while it’s positive that the number of properties available to rent seems to be rising, this is just a drop in the ocean; it isn’t nearly enough to fix the market for tenants.

“Coupled with the gradual removal of mortgage interest relief, new energy standards for landlords and the ever-increasing fees for these schemes, landlords are being expected to bear more and more costs; which is probably why the number of landlords leaving the market has remained at the all-time high we saw last month. 

“We’re all striving for the same end goal of improving the private rental sector for consumers, but the only thing which will truly create a better – fairer – market, is a dramatic increase in supply.”

HomeLet Rental Index shows rent rises in London…

May data from the HomeLet Rental Index shows that averagerents across the UK rose by 2% in May 2018, compared to the previous May, and the average monthly rent is now £919. The biggest increase is in London, where rents rose by 5.6%; the average rent in the capital now stands at £1,586 per calendar month. When Greater London isexcluded, the average UK rentwas £763 in May 2018, upby1.3% on the previousyear. Rents rose in 11 of the 12 regions covered in the research. 

Compared to May 2017, the biggest rent increases were: Greater London (average rent £1,586, up 5.6%), Scotland (£650, up 4.5%), Northern Ireland (£634, up 4.1%), West Midlands (£678 up 3%), North East (£533, up 2.1%), Yorkshire & Humberside (£628, up 2.3%), North West (£692, up 1.9%), South East (£1,008, up 1%), East Midlands (£617, 0.5%), South West (£805, up 0.2%), East of England (£911, up 0.2%). 

Meanwhile, rents in Wales went down, by 0.2%, with an average rent of £604.

… but ONS shows a slight drop in London rents

Figures from the Office for National Statistics (ONS) show that private rental prices in Great Britain rose by 1% in the 12 months to May 2018; unchanged from April. Wales saw an increase of 1.2% and rents rose by 1% in England and 0.6% in Scotland. 

Rent increases have slowed since the end of 2015, and in the 12 months to May 2018 the average nationwide rent rise was 1%. This was largely driven by a slowdown in London over that period. In Great Britain excluding London, rents increased by 1.6% in the year to May (unchanged since January), whereas in London rents fell by 0.2%. This is the first time that private rents have fallen in the capital since September 2010.

Rent rises in the East Midlands and South West

As rents in London continue to stabilise and drop off, with a fall in the year to May 2018 of 0.3%, rental figures in some other regions are now rising faster, according to the Your Move Rental Tracker.

Rents in May rose more in the East Midlands and the South West than anywhere else in England and Wales during the last 12 months, with an average rise in both regions of 3%. Rent in the South West now stands at £682, and at £656 the East Midlands. Across all regions, the average rent is £818 a calendar month, and London remains the most expensive place to rent, at a monthly average of £1,273. 

Other regions have seen greater price falls than the 0.3% of London. In Wales the average rent is down 2% and now stands at £587, and in the North East the average rent is £536, reflecting a fall of 1.6%. Wales, the North East and London were the only regions to show an annual fall.

After several worrying months of rising numbers of renters in arrears, there was a fall in May, with 9.2% of all tenancies behind in their payments, down from 9.4% in April. Although the figure has hovered around the 9% mark all year, this is still well below the recent high point of 13.7% in July 2017 and the all-time high of 14.6% recorded in February 2010.

Martyn Alderton, national lettings Director of Your Move, comments: “Landlords will be encouraged to see strong rent growth and solid yields in most areas of England and Wales. However, for renters the East Midlands and South West have seen prices grow faster than anywhere else in the UK. Meanwhile landlords in most of the nine regions surveyed have seen their returns remain steady this month, contrasting the recent declines we have seen.” 

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