Residential Lettings in the UK: Where are we Now?

The average rent for a UK property has increased by 12.6% in the last 12 months, but this growth has turned negative in recent months, according to data released today by rentindex.

According to rentindex the average rental rate of a UK residential property on December 13 2009 is 587.487 per month, based on 4860 tenancies. This is, as I said an increase of 12.6% on last year, and an increase of 0.176% on 6 months ago. Unfortunately it is almost 0.2% down on 3 months ago, and nearly 1% lower than it was last month.

The Royal Institute of Chartered Surveyors has recently forecast the rents will rise in 2010, as rental supply weakens when more forced landlords start to put their properties onto the somewhat revived market.

"It seems the current upward trend in the housing market is having a significant effect on the lettings market with many of the accidental landlords returning to the sales market to take advantage of the recent price increases," said RICS spokesman Jeremy Leaf.

"As a result the recent oversupply is reversing with new instructions at the lowest levels we have ever seen. This of course is impacting on prices and tenants no longer have as strong a bargaining power as they did," he added.

However, a recent study by the BDRC research group found that of the 20% of residential landlords that have been such for less than 24 months, only 1 in 20 have been forced into it by their inability to sell their property.

I am reluctant to argue with RICS stats, -- despite the fact that they have a commercial interest in positivity in the market -- because they are well respected and at least try to go with what the market is really doing. I am less reluctant to argue with the BDRC because they are equally if not more respected, and do not have a commercial interest in either the rental or the sales sectors of the residential property market.

To avoid arguing with either, I will instead suggest a potential alternative reason why rental supply might be decreasing; in a word: Christmas. Very few people want to move house at Christmas time, so it is possible that landlords have decided to save their marketing pound during a recessionary Christmas. Perhaps this is combining with the small number of forced landlords deciding that now is in fact time to sell. This could also potentially explain why rental rates have fallen recently.

But we can't have it both ways: supply is currently supporting house prices, pushing them upwards even. So, yes, this may well make more people feel like selling. As prices continue to rise it may even make more people able to sell by removing the negative equity noose from around their mortgaged neck. But if supply increases, this will then push prices down again, and supply will either cap-off or even fall once again, and rental supply will likely increase again also.

Where I do agree with RICS is in rental demand. The New Year is a time when a lot of people think about moving house, and with the still-restricted mortgage market and 10,000 average deposit, this will mean looking at somewhere to rent for most people. However, this increasing demand will also bring about increasing supply as those people will be moving out of somewhere and that property will become available.

Like this post? Subscribe to our feed by RSS or Email, join our newsletter(s) or leave a comment using the form below.