This year the market has had to adapt to further legislative changes all the while dealing with the UK's planned departure from the EU in 2019. As 2018 draws to a close, we've compiled a state of the market snapshot, so you can get a feel for what's going on.
Is demand for rental property still rising?
The latest research by Dataloft compares Q2 2018 with the same period last year, it showed:
- Viewings of properties for rent were up by 13.3%
- The number of leases signed was 3.5% higher
A survey by BM solutions of 700 landlords in Q3 2018 found that:
- The proportion of landlords reporting a drop-in tenant demand is now at its lowest point since the end of 2016, falling 8% from last quarter
Whilst the level of supply and demand vary across the country in many locations the demand for rental property remains high.
How is the supply of homes coping?
The Dataloft study also showed that:
- Letting agents took on 6.9% fewer new instructions in Q2 2018, when compared to last year
Any fall in supply is potentially bad news for tenants, especially in high demand areas. For some landlord’s elements like changes in tax relief and Government intervention could lead to an increase in those exiting the market. Our recent survey of over 2,900 landlords suggested that only 9% of respondents planned to sell their properties.
As a landlords which statement best describes your outlook for your property portfolio:
- 78% stay the same
- 9% sell and reduce
- 12% buy and expand
For landlords a fall in supply, and subsequent competition properties from tenants, could lead to fewer void periods and longer tenancy terms. If landlords are selling properties, this also provides investors who are looking to grow their portfolios with the chance to purchase homes which are tried and tested for the rental market, potentially with sitting tenants.
Rental values – what’s the latest?
Rental growth over the previous year or so has not been as consistent as in previous years. This is partly due the demand for rental properties slowing somewhat following a period of continual growth.
The HomeLet Rental Index shows the UK average rent now stands at £928, which is 2.1% higher than last year.
Commenting on the latest data, Martin Totty, chief executive at HomeLet, said:
“This year average rents have continued to increase year-on-year broadly in line with the current rate of inflation and the growth in average wages, meaning affordability in most parts of the country is little-changed.
“The exception is London and the South East, where average rents have increased above both inflation and average wage growth. In contrast to house price trends in this region of the country, activity levels in the private rented sector remain resilient.
“Landlords committed to the sector here seem able to command higher rents, potentially providing some offset to the negative headwinds of taxation changes some will have experience”
A recent study by Countrywide looked at rental growth over a ten-year period. The research shows that real rents - those adjusted to take inflation into account - have dropped by over 2% since October 2008. Analysis indicates that over the last decade rents have risen by 22%, with inflation rising by more than 24% during the same period.
As with supply and demand, average rental growth will fluctuate across the year. However, generally the signs are positive with rental growth continuing to grow in line with inflation in many areas of the UK.
What other trends have we seen this year?
The Dataloft research report also showed:
- The majority of rental properties outside London are let unfurnished. In the capital, 60% of rental properties include furniture.
- London tenants would pay a price premium of 19% to live on the second floor or above. This falls to 6% outside of the capital.
- Over a quarter of tenants moved to their current rental home from within a mile of their previous one, while around 5% moved between 25 and 50 miles to their current accommodation.
- Sharers make up just 11% of tenants outside of London - a figure which rises to over 26% in the capital.
Despite numerous challenges for the wider housing market, the PRS has remained resilient. Whilst we have seen indications of declines in demand in the sales market, average rents and demand for rental properties sustained in many areas.