Rents grew by an average of 0.07% in January, marking what is expected to be the start of a year of sustained rental growth for the UK. But we find that many landlords who come to us are NOT getting the full rental return that the market commands.
According to the report, the average UK rent now stands at a record £1,198 per month, a 0.66% increase on this time last year. While rents in the capital (£1,876) remain around 2.5 times the rest of the UK (£760), this is still £16 a month shy of the £1,893 record set in May 2016.
Much has been made of the sinking rents in London, which have fallen in every month since that record was hit in May 2016, however the capital is no longer exerting such downward pressure on the national average. Rents in London grew by 0.03% in January, softening the year on year decline to -0.54%.
While every region saw rising rents in January, the speed of rental growth has not been consistent across the UK. At a country level, Wales (0.10%) had the most rental growth, while Northern Ireland (0.01%) lagged behind. From a regional perspective, the East Midlands experienced rental growth of 0.18% in January alone, followed by the East of England (0.13%). Meanwhile, rents in the North East paralleled the 0.03% growth seen in London.
Recent forecasts from Savills have predicted that rents will rise by 2.5% this year, and by a cumulative 15.5% over the next five years1. This forecast reflects the current state of the buy to let sector, which has faced a number of tax and regulatory changes that threaten to exert upward pressure on rents. If rents do continue to rise, it suggests that the increased cost and compliance pressures on landlords are beginning to flow through into higher rents for their tenants.
John Goodall, CEO and founder of Landbay said: “With all the tax and regulatory changes landlords have shouldered over the past couple of years, an uplift in rents has been on the cards for a while, and is likely to continue into 2018. Stamp duty changes pushed up transaction costs for landlords back in 2016, as have a raft of new regulations from the PRA landing in 2017. Furthermore, the Bank of England’s Term Funding Scheme comes to an end this month, pulling away one of the crutches that has allowed many mainstream lenders to keep mortgage rates so low. This, together with gradually rising interest rates, will eventually push up borrowing costs for banks, and consequently for landlords, who will have to pass some of these costs onto tenants in the form of higher rents.
Landlords who turned their backs on London when rents started to dwindle may now want to reconsider. House prices have declined in the capital for four consecutive months and, combined with positive rental growth of 0.03% in January, yields will now be climbing.” Thanks to propertyreporter.co.uk for the original article.
We speak to many potential landlords who have their property under the management of large/chain agents or manage their properties themselves who are NOT getting the current market value for their rental properties. Buy to let is a business, even if you only have one property. Whilst there is a balance between what is legally and ethically correct, landlords are entitled to market value – no matter how “loyal” their tenants are.
When we conduct (free, no obligation) rent reviews for potential landlords many tenants we speak to say that they “have been a good tenant and always pay their rent on time”. Unfortunately paying rent on time is a minimum requirement not the gold standard of being a tenant. Many landlords who “self manage” are scared of loosing these “good tenants” if they put the rent up. We would usually recommend a “step ladder” approach so that the tenants are still comfortable with the situation. Landlords must however balance this with the responsibility to make sure the house is “up to scratch” at the new rental price and that the tenants still “stack up” on affordability. The tenant’s affordability should still pass the necessary measures and checks that they did when they moved in!
If you are a landlord that self manages their properties, or you use an agent that you think might not be doing enough to proactively manage your portfolio then contact me today for a FREE, NO OBLIGATION REVIEW of your portfolio and rents.