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Rental market: how accurate were the industry’s predictions?

Posted on 2017-12-22

Rental market: how accurate were the industry’s predictions?

As one year comes to a close and another one begins, it's the time when experts from all corners of the industry put forward their property predictions for the coming 12 months.

We've taken a look back to the end of 2016 to analyse the accuracy of some experts' predictions and forecasts for 2017 and to see if this gives any indication of what lies ahead for 2018.

Prediction: 'The UK is on the brink of a Build to Rent explosion' - (Strutt & Parker, Stanhope and Network Homes)

Verdict: The Housing Futures: Urban Renters report, jointly authored by Strutt & Parker, Stanhope and Network Homes, claimed that the UK was on the brink of a Build to Rent explosion - was this the case in 2017? Well, institutional investment has progressed quickly this year, with the British Property Federation reporting that the Build to Rent sector now consists of over 95,000 units which are either completed, under construction or awaiting planning permission. Meanwhile, Knight Frank suggested earlier this year that there will be an additional £45 billion of institutional investment in the PRS by 2022. It's clear that the Government is keen for Build to Rent to grow and after looking at recent activity it's fair to suggest that the prediction made in the Housing Futures report was a pretty astute one.

Prediction: 'Tenant arrears will worsen in 2017' - (Online letting agency Upad)

Verdict: Upad predicted that landlord tax changes and higher rents could potentially cause an increase in tenant arrears. LSL Property Services recently reported that 8.7% of households in England and Wales were in rental arrears during September, a figure which fell from 13.7% in July and 12.8% in August. It has also been reported throughout the year that the number of households in arrears has been consistently below the all-time high of 14.6% recorded in February 2010, whilst rent arrears remains a concern, the prediction of increased rent arrears was potentially off the mark.

The HomeLet Rental Index has reported that rents have now lagged behind the general rate of inflation (as measured by the Consumer Price Index) since December 2016, representing a reduction in real terms, of rental inflation throughout 2017. Read the HomeLet Rental Index here.

Prediction: 'Quarter of investors will quit the PRS due to tax changes' - (Residential Landlords Association)

Verdict: One of the biggest anticipated changes of 2017 was the introduction of a restriction of buy-to-let mortgage interest tax relief. The Residential Landlords Association surveyed 1,000 landlords and found that around 25% of respondents said they would quit the sector due to the impending tax changes. While it's hard to find more than anecdotal evidence to test the strength of this forecast, since the changes were introduced in April, there have been several studies that have showed landlords are still willing to invest and expand their portfolios. For example, Mortgages for Business has consistently reported that a growing proportion of landlords are seeking to expand their portfolios. That's not to say, however, there aren’t some landlords who have sold up and ended their interest in the PRS.

Prediction: 'Rents will rise in 2017' - (RICS/ARLA Propertymark) 

Verdict: With a number of changes expected - most notably the restriction of buy-to-let mortgage interest tax relief - it was no surprise that many organisations predicted rents would rise this year. Some 80% of letting agents surveyed by ARLA Propertymark said they anticipated rents to rise this year and a large proportion of RICS members predicted rent rises due to a supply/demand imbalance of rental property. The HomeLet Rental Index has shown that the rate of growth in many areas may not have been as high as anticipated and in many parts of the country rental growth has slowed.

The last few years have certainly been hard to predict and making forecasts for the property industry is never easy. That said, some organisations were pretty close to the mark with their outlook for 2017. As we enter a new year, expect the unexpected, further legislative changes and rental growth that continues to fluctuate. 

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