"Government intervention in the PRS will mean that rents are likely to increase in line with costs rather than in line with earnings, as landlords are forced to increase rents due to lower profits from higher costs and taxes"
Dorian Gonsalves, Belvoir's Chief Operating Officer, said: “Belvoir's Q4 rental index, which we commissioned from TV property expert Kate Faulkner, confirmed that in general, rents continued to rise in line with earnings, with London the key exception. Belvoir has over 300 offices nationwide and data for those offices that have traded consistently over the last eight years in England, Wales and Scotland, indicates rental increases of just over 1.25%, year on year, from £734 in Q4 2015 to £744 in Q4 2016.
The latest data from annual average monthly rents clearly demonstrates dramatic variations in regional performance, with rents ranging from £598 in the North East, £717 in the South West, through to £975 in the South East and £1,478 per month in London.
When comparing the Q4 2016 average rent to the 2015 annual average of £722, this shows a 3% increase, which was exactly in line with our forecast at the end of 2015. These findings are at odds with claims made in the Government's recent White Paper that renting is 'expensive,' as clearly this is not an accurate reflection of the situation across the whole country.
However, Belvoir has warned for some time that Government intervention in the PRS will mean that rents are likely to increase in line with costs rather than in line with earnings, as landlords are forced to increase rents due to lower profits from higher costs and taxes. In December we predicted that rents are likely to rise by as much as 15% in the next three years, although this will vary from region to region. Should rents rise in excess of earnings this will of course be detrimental to tenants – a situation that cannot be blamed on 'greedy landlords', but rather more on the Government's misunderstanding of the dynamics of the PRS.
Despite Government efforts to curb BTL investment, existing and new investors were still looking to buy in Q4, although some areas saw reductions. Two to three bed properties were generally in short supply, but there was an oversupply of flats in some areas, so investors would be wise to talk to local property agents prior to committing to any purchases.
Interestingly, almost half of all of Belvoir's tenants are renting properties for between 13-18 months, and a similar percentage rent properties for 18-24 months. Most of Belvoir's tenants actually choose to leave, and we have an extremely low number of evictions, so it is clear that tenants are already able to find security in the rental market, provided they seek professional help from an agent that is committed to matching good properties and landlords to tenants at a local level.
Throughout 2017 Belvoir will continue to work with decision makers and we hope that some of the Government's recent changes will either be reversed or incentives will be launched to help drive up the supply of rental properties. This would then bring down rents and benefit millions of tenants, making for a healthier rental sector.”
