Four rental trends landlords should keep an eye on
Be it new legislation, shifting demographics or rising expectations, the UK rental market is always evolving and developing.
For landlords who want to stay one step ahead, keeping up with rental trends and patterns can be very beneficial, particularly if you're looking to expand your rental portfolio or enter a new market.
Using the latest data, figures, and studies from the industry, we take a look at four rental trends that you might want to be aware of.
Birmingham is becoming more of an investment hotspot
There have been several reports released recently which point to Birmingham becoming more of a hotspot for property investment.
The Midlands city was named as the European city with 21st best overall investment prospects in the Emerging Trends in Real Estate: 2018 report compiled by PwC and the Urban Land Institute. That’s higher than both London and Edinburgh. One of the reasons for this is its increasing popularity as a location for major companies to operate from - with HSBC UK being one of the recent movers to the area. There's also been negotiations around further devolution as well as continued development of several key infrastructure projects.
A separate study, The Global Real Estate Outlook, which was carried out by IP Global, ranks Birmingham as one of the UK's best investment locations thanks to solid average yields and rising property prices. What's more, the report cites Birmingham’s 20-year Big City Plan which aims to increase the size of the city's core by 25% and provide improved public transport as well as up to 5,000 new homes and 50,000 new jobs.
For many investors, looking north of the capital provides some of the best results. Alongside traditional investment hotspots like Manchester and Newcastle, it seems Birmingham is attracting interest from a growing number of shrewd investors.
Are tenants increasingly moving away from the capital?
It would be fairly perceived by many that the capital is a magnet for private renters, attracting people from all over the UK and beyond. And while London unquestionably remains a hotspot for renters, there is a growing trend of people moving away from the UK's biggest city to rent elsewhere.
According to research by Countrywide, a record 64,672 tenants left London over the last year, with 78% of those leaving the capital to rent elsewhere. The property services group says that this shift has been emerging gradually over the last decade when tenants traditionally left the London rental sector to take their first steps on the property ladder.
Almost half of London leavers over the last year chose to move to the Midlands or the North, compared to 31% in 2007.
Countrywide's research director, Johnny Morris, says this trend reflects the wider situation of the average age of a first-time buyer continuing to rise as people rent privately for longer.
Incorporation continues to be popular with buy-to-let landlords
Another consequence of the changes to the way landlords can claim interest tax relief on their buy-to-let mortgages has been a move towards incorporating and letting properties through limited companies.
According to Mortgages for Business, during the third quarter of 2017 mortgages sought by limited companies accounted for almost four in five of all applications.
The firm estimates, however, that the trend of rising registrations for Special Purpose Vehicle limited companies has actually been developing since 2008.
That said, it is clearly something which has taken on more prominence recently, with 20,000 SPVs registered in the year so far, compared to 13,000 in 2014. And this figure is expected to reach 35,000 by the end of 2017.
Rental growth is slowing in the South East
Despite it consistently being referred to as one of the country's best locations for growth in house prices, the South East is experiencing a bit of a lull when it comes to average rents.
Our data shows that the average rent on a new tenancy in the South East during October was £977, 2.4% lower than the £1,001 recorded in September and 0.8% lower than the £985 recorded in October last year.
Of the 12 regions we monitor, the South East was the only one to record negative annual growth in October. However, all 12 regions registered a monthly decline when compared to September's figures.
On the flipside, the two areas with the best annual rental growth were the East Midlands and Northern Ireland with impressive yearly increases of 3.6% and 3.4% respectively.
Rents in the South East are generally higher than in most locations across the UK, but after years of growth, these figures now appear to be stabilising.