Rent is on the rise once again, according to a recent Arla Propertymark report. In September of 2018, nearly a third of all renters experienced payment increases, compared to only a quarter of renters in 2016. However, when compared to August of 2018, the rate of increase for September was considerably lower. An impressive 40% of tenants saw an increase in rent during August, resulting in a record high for the UK.
The Cost of Letting
While more and more tenants are seeing a slow rise in rent, prices in London dropped by 1.3% over the past 12 months, as reported by Your Move. This is welcome information, but it doesn’t overshadow the fact that London is still the most expensive place to rent in the UK. The average rental price is currently 1271 pounds per month.
Compared to London, the average rent in the North East is at 535 pounds per month. Despite the obvious difference between London and other less-populated regions, London remains one of the only areas of the country that hasn’t seen significant increases in rental prices.
In September, the South West saw the most dramatic increase at 4.3%, bringing the average rental price up to 686 pounds per month, still nearly half of the average in London.
Buy-to-Let Market Shift
A recent article by the BBC addresses the shift in the buy-to-let market. The Royal Institute of Chartered Surveyors (RICS) predicts rent could rise by more than 15% over the next five years as landlords continue to vacate the market.
Recent tax changes may be to blame. Buy-to-let investing seems to be less profitable for new and existing landlords these days. The tax changes that occurred last year included a reduction in mortgage tax relief for landlords while cutting costs for first time home buyers. The goal was to encourage people to buy homes rather than continue to let property. Since 2010, investors have built over one million new homes throughout the UK in the hope of realising “the dream of home ownership for a new generation.”
The Future of Letting in the UK
Despite the encouragement to buy homes, the demand for rental properties is increasing in nearly every region in the UK. Economists believe the combination of the lack of available properties and the increase in the number of renters looking for a place to let is the leading factor in the steadily increasing rental prices.
It’s a vicious cycle. Landlords are pulling out of the buy-to-let market because of declining profit margins, which reduces the availability of rental properties. Letters who cannot afford to buy homes are competing to find adequate rentals in a market that is not meeting the supply needs. All of this results in increased rental prices which will continue to rise without a shift in mindset. If the government can’t step in and initiate needed change, the supply of new rental properties will only continue to decline while the demand increases.
Resources & Further Reading: