Higher rental costs on their way as landlords withdraw investment in market

Monthly rental growth remained unchanged across the UK in April, ONS data shows, but rent prices were up annually and there are warnings that large increases are on their way.

The ONS Index of Private Housing Rental Prices found average UK rents rose on a yearly basis by 1.2% in April, or 1.5% when London was excluded.

Rents in England grew by 1.2% annually, Wales experienced growth of 1.1%, while in Scotland private rental prices increased by 0.7% in the 12 months to April.

Kate Davies, executive director of the Intermediary Mortgage Lenders Association (IMLA), said: “Rental prices continue to be subdued and below the rate of consumer price inflation across much of the UK.

“Given that landlords have now started to feel the effects of income tax changes in their most recent tax bills, it is perhaps surprising that stronger pressure to increase rental prices has not yet materialised.

“IMLA continues to believe that weaker investment by landlords will affect rental availability and eventually result in higher rental costs, which will make saving for a deposit harder for tenants who are hoping to get on the housing ladder.

“We will continue to argue that no additional measures that risk further eroding the health of the private rental sector should be introduced, and that the number of available rental properties does not decrease still further.”

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5 Comments

  1. James Wilson

    It isn’t surprising at all that rents haven’t increased. Only estate agents and people who support the unfair advantages of BTL like IMLA were scaremonger on this. Rentsare set in an open market by what tenants can afford to pay. End of story.

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    1. Realitycheck97

      Supply and demand principles will prevail. Curtail supply and prices will rise.

      If supply constrains, the only factor that will prevent rental growth will be if rents hit the limit of affordability in their area. When that ceiling is reached, the next effect of lack of supply is sharing (see London) and eventually overcrowding.

      Why is BTL unfair? Provided the landlord and property are decent, what is unfair about housing being provided by a private supplier than a state supplier? And before private landlords are labelled as ‘profiteering lizards’, evidence your reply by explaining the eviction rates compared to HAs (similar), housing standards as per the English Housing Survey and the very low dispute rate evidenced by the deposit scheme dispute rates.

      The PRS needs to improve but it stands comparison with the state sector. So, why unfair?

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    2. Will2

      Careful James your starting to sound logical about rent levels. Markets do set rents.

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    3. JMK

      James you have surpassed yourself. You’ve come out with some rubbish on the time you have been posting here but this I think is your best piece of work.

      “Rentsare set in an open market by what tenants can afford to pay. End of story”.   So… a prospective tenant comes to me looking to rent, say a 3 bed house.  Under your scenario I say to him ‘What can you afford?  £500pcm?  OK that’s what we set the rent at then”.  Or “What can you afford?  £2k?  Fair enough.  Sign here”.

      Rents are set by supply and demand with one or two notable exceptions.  So if you restrict supply but do not correspondingly do so with demand there is only one thing that can happen.  The ceiling on rents is pushed higher.

      Notable exceptions are for example rent controls, which time and time again have been proven to have the opposite effect to that intended.

      Another one being when a major player decides to increase rents.  If someone only has only one or two properties and increases rents above the market rate by, for example 5%, he or she risks losing a tenant or having a property stay empty for a while.  If a landlord with hundreds of properties does it then that becomes the new market rate.  So with smaller landlords being forced out of the market to make way for the corporates do you perhaps see an issue coming for you??? For those landlords that decide to stay in the game it’s good news of course :).  They can increase their rents too to keep up and that’s the whole supply and demand forces at work again.

      Another area you may care to look at which ably demonstrates this theory is that of social landlords who have been increasing their rents faster than the PRS.  Big landlords are market movers.

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      1. Deltic2130

        James Wilson – you haven’t considered how ‘what tenants are prepared to pay’ varies with changing circumstances. They were ‘never going to pay more than £800’ here four years ago, now it’s ‘never going to pay more than £1200…’

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