Rental Price Reality - the real truth about rental levels

publication date: Nov 11, 2013

Despite some major claims of Help to buy affecting the rental market and continued talk of ‘record highs’ by the rental reports, the reality is rents are pretty static across the regions.
Here’s the headline summary and my thoughts on what’s happening to rents:-

Move with Us “Help to buy scheme suppresses rent rises. (Q3 13 - England, Wales & Scotland)”
Belvoir Lettings “Average rents for September 2013 were £689 per month for offices which have traded consistently over the last five years. Although this is a slight increase on the previous month, rents overall remain fairly stable. (Sept 13 – England, Wales & Scotland)”
Acadametrics/LSL “Rents reach record high in September. (Sept 13 – England & Wales)”
Homelet

“Monthly rents dip, but annual costs rise more than income.

(Sept 13 – England, Wales & Scotland)”

Paragon Group  “Optimism increases among landlords. (Q3 13 - England, Wales & Scotland)”
ARLA “Compared with three months ago, the average weighted rental return for houses is up from 5.0% to 5.2% and the average weighted rental return for flats is up from 5.2% to 5.4%.(Q3 13 – England, Wales & Scotland)”

  

OK, so flat to an increase of 5% sounds great for tenants, but landlords need to remember what this means is in most areas, rents are not rising at the same rate as inflation. For any region or any property you have, if rents aren’t increasing on average at 3% per year, the value of what the rent can buy you is actually falling.

Spotlight on London Rents

In Greater London, all rental indices agree prices are rising slightly above inflation increases between 3.9% and 4.8%. However, Move with Us is the exception, showing a fall of -3.8% year on year, but we feel their rental prices are slightly on the high side.

To summarise, the rental surveys and agents/landlords we speak to, tell us the majority of rents vary from stable to slightly rising. The main exception to this trend is Greater London, where all three indices suggest rents are growing by 1-2% more than inflation.

If you are a landlord/tenant in areas where rents are rising, such as Greater London, rents vary across the indices from £1,140 to £1,565. The Move with Us quarterly index suggests an average of £2,200 suggesting their figures include more than the ‘average property to rent’, such as Prime Central London. Overall, the indices are suggesting rents are rising year on year, but only just above inflation.

Landlords – With rents rising above inflation, this is good news if you are looking to rental income to provide in your retirement. However, with increases in rents, so tenants increase their demands and properties should be in tip top condition to maximise rental income.

Visit our Maintaining your Property Checklist.

Tenants – When rents are on the up, it is best to secure accommodation sooner rather than later. However, don’t be forced into renting ‘anything’. Landlords should be members of associations such as the Residential Landlords Association and agents ARLA or NALS. If they aren’t, it’s too risky to rent from them.  Visit our Work out if Buying is Cheaper than Renting for you Checklist.

Letting Agents – With such a huge shortage of stock to rent, you are going to need to make sure you take advantage of things like the ‘build to rent’ scheme, supported by the government. Securing new business based on cutting commissions is a recipe for financial disaster, so aim to deliver great service to secure landlords and tenants in the long term.

Join PC to download the rental summary report in full


All our information is brought to you by Kate Faulkner, author of Which? Property books and one of the UK's top property experts.
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