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A Rental Market Update | Phil Spencer

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Conventional wisdom has it that when house sales soar, the rental market eases, and vice versa. But, as with so much these days, things are changing.

The current rental market is strong. The Office of National Statistics (ONS), Index of Housing Rental Prices states that private rental prices, paid by tenants in the UK, increased by 1.3% in the 12 months to August 2021, unchanged since July 2021.

Private rental prices grew by 1.2% in England, 1.2% in Wales and 1.6% in Scotland in the 12 months to August 2021. And the growth continues.

Competition is high amongst prospective renters, but why is that?

Fewer homes to rent 

Several years of increased taxation and stricter rental regulation on landlords have, for some, made buy to let investment less attractive – this is a long-term government plan to make more properties available to first-time buyers rather than to landlords.

The irony, however, is that fewer homes to let mean more renters are chasing fewer properties – and so rents rise, making it harder for people to save up deposits in order to buy.

Add to all this one other factor. Tenants who would normally switch to a different property, or might have saved enough to buy, have instead stayed put because they now work from home, or are worried about finances, creating a lower turnover.

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Demand on the rise

This reduction in the supply of homes to rent comes as demand is actually rising. Not least from younger people priced out of buying their first home due to price increases. 

Unusually, this high demand is most extreme in the southwest and northern England. It’s thought that some from the southeast and London are ‘trying out’ lifestyles while now working from home more often.

What is the average rental in the UK?

According to Homelet Rental Index for December 2021, the average rental price for a new tenancy in the UK was £1,060 per calendar month (PCM). Up by 8.3% from last year. 

Renting and the levelling-up agenda

As part of the government’s ‘Levelling-Up Plan’, it has been proposed that properties in the private rental sector (PRS) are required to meet a “decent home standard“. Meaning that landlords of properties that don’t meet the standard will have to bring them up to date.

It’s estimated this will impact over 800,000 properties.

There’s no doubt that this is welcome for tenants who should expect a decent home standard. However, any additional home improvement rules could increase the financial burden on landlords further. This could in turn result in them deciding to sell off these properties.

As we’ve already seen a reduction in the number of available properties to rent will force up monthly rents. This will have a massive impact on those 4.4 million households in England who rent privately.

National register of landlords

The government has also announced they will be consulting on introducing a landlords register (something that has been discussed for about 15+ years!). With the plan to crack down on rogue landlords – making sure fines and bans stop repeat offenders leaving renters in terrible conditions.

But whether a simple register of landlords will suffice to change their behaviour and improve housing stock, has been widely debated in the property industry.

Abolition of Section 21

Also, Section 21 ‘no fault’ evictions will further be abolished. Ending the unfair situation where renters can be kicked out of their homes for no reason. This might sound good at a headline level, but what will replace it to regain confidence in the market for landlords. Like it or not, landlords are needed to provide a significant amount of property for tenants to rent.

We will provide updates on how things progress here and via our newsletter – join us by subscribing below and get Phil’s advice direct to your inbox.

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Last Updated: February 2nd, 2022