Buy to let landlords committed to sector and crucial to supply of homes despite threats on the horizon, says Allsop report
- Annual rent rises over the last five years stable and in line with RPI in England and Wales
- 59% of landlords are renting at least one property at below market rate to keep good tenants as affordability bites
- Two thirds of landlords say it has become more difficult to obtain buy to let finance since the implementation of PRA changes last year
- A cocktail of policies hitting landlords threatens long-term PRS supply, with higher rent increases more likely in the future
- 41% of landlords rate the immediate outlook as good or very good for their portfolio
Residential rent rises in the private rental sector (PRS) have tracked inflation and RPI (Retail Price Index) in England and Wales at a lower rate than perceived over the last five years, according to Allsop’s latest issue of the Rent Check, a barometer for the rental market in England and Wales published with BDRC.
The survey analysed annual rent rises during five years to March 2018 across different regions and property types. Of 54 combined data points, 32 lay below RPI and 22 above, revealing annual rent increases were closely tied to the rate of inflation. It is believed that rents have been moderated by affordability levels which has weakened tenants’ ability to pay. The UK has seen the cost of living rise and wages stagnate over the last decade.
Rent levels have also been tempered by a high number of landlords letting properties at below market rate to keep tenants. Approximately 59% of landlords surveyed declared they are letting at least one property at below local market levels.
But the most important factor in stabilising rent levels has been good PRS supply, which has kept up with the growing demand for rental accommodation. However, a policy cocktail of PRA changes, tapering tax relief and newly proposed three-year minimum tenancies could have a detrimental impact on future supply and result in a sharp increase in future rents.
The Government recently announced a consultation to replace shorthold tenancy agreements with three-year minimum term leases. Lenders have traditionally been less willing to provide mortgages where they are unable to repossess a property at short notice. This comes as two-thirds of landlords surveyed stated that PRA changes, which impact landlords with more than one property, have already made it more difficult to secure finance.
Paul Winstanley, Partner at Allsop, said: “Shattering the myth of rent rises greatly outstripping inflation, research has revealed rents have in fact risen moderately at a rate close to RPI over the last five years. Landlords have also been prepared to accept lower rents for good tenants. This, and past commitment by landlords to invest in the supply of buy to let property, have helped keep rent rises sustainable.
“Although most landlords are committed to the sector and are not likely to sell-up and leave anytime soon, government policy is likely to make life difficult for them in the longer-term. This risks the supply of much needed housing, which can’t be met by the build-to-rent sector and homeownership alone.”
Mark Long, Research Partner at BDRC, said: “Our unique Landlords Panel research programme feeds a range of statistics to the Rent Check report, and we continue to see a great deal of resilience being demonstrated by private landlords. Current PRS policy conversations around longer mandatory tenancy agreements are causing uncertainty in the market, and it will be interesting to see, from a rental pricing perspective, how landlords and their representative bodies react during the consultancy period on these key proposals.”
The Rent Check report found that 85% of landlords surveyed are currently making a profit, a figure that has not changed since early 2017. It has revealed that despite the uncertainty surrounding the impact of policy, a substantial number of landlords will remain in the sector and are unlikely to leave any time soon, with 41% of landlords rating the outlook for their portfolio as good or very good for the next quarter.
Notes to editor
Allsop is an independent property consultancy with a market-leading reputation for high quality service, integrity and innovation. We are also well known as the UK’s largest and most successful auction house. Our success is built on over 100 years’ experience in commercial and residential property consultancy and sales.
For details visit www.allsop.co.uk
About the Rent Check
The Rent Check is based on a survey of 1,557 landlords across England and Wales undertaken in H1 2018.
For further information or supply of images:
Paul Winstandley or email@example.com