The rental market continues to operate at two very different speeds. Homelet’s latest data shows the average rent rose by 0.3% between January and February and by 3.0% when compared to the same period last year. Ten out of the twelve regions saw significant rises during the last 12 months, with the East Midlands up by as much as 8.2%. If you take London out of the equation, the average rent rose by 6.2%. In the capital, annually, rents were down by 4.7%. However, Homelet points out that London’s rents are still 87.1% higher than the rest of the UK’s. And, as we reported last month, the capital’s rental market is showing signs of turning the corner, with rents beginning to rise rather than falling. In February they were up from £1,563 to £1,572.
The chancellor’s March budget, though, is likely to bring further changes. Supplies of rental property were already being affected by the Stamp Duty Holiday, as many landlords took advantage of the buoyant conditions to divest themselves of some of their properties. This process is now likely to continue until autumn when the new holiday period finally comes to an end. In London, it’s especially pronounced – 13% of stock currently listed for sale is ex-rental (source Zoopla). So, as we slowly return to our city centres, there may be supply shortfalls and rents could start rising significantly in more central areas. Rightmove has already seen a surge in searches for rental properties in London’s zones 1 and 2, with traffic up by as much as 126% in some areas. However, with the threat of an increase in capital gains tax receding, at least for the time being, some of that motivation to sell has been reduced.
Andy Halstead, chief executive at HomeLet & Let Alliance, explains why he expects those rent rises to continue over the coming months:
“Those in the lettings sector warned of the Tenants Fees Act’s unintended consequences, along with the impact of the continued assault on landlords through policies that disincentivize property investment. We’ve seen the volume of UK landlords dip, whilst supply from tenants has continued to grow. Landlords have to charge more to cover their essential costs, including professional letting agents’ valued services. Ultimately this pushes increased rents back on to tenants, the same group who supposedly should have benefited from legislation like the Tenants Fees Act.”
In other news, the eviction ban for tenants has been extended yet again. This time until “at least 31 May”, according to Housing Secretary Robert Jenrick. It will then “taper off”, although there are, as yet, no details about how that might work. And finally, a reminder to all Homesite’s landlords that electrical safety tests are now required for all existing tenanted properties (from April 1st) and Right to Rent checks on EU citizens will change from 30th June 2021, to take the new Points Based Immigration System into account.