According to the latest figures released by Homelet, the average rent in the UK has reached a record high of £1,007, up 5.9pc on the same period last year and 7pc on 2019, with almost every region in the UK showing an annual price increase.
London experienced the first increase in over a year, with an annual rise of 1.5pc to £1,607 per calendar month. Yet this figure is still lower than in June 2019, the year preceding the pandemic, when the average was £1,611 pcm. Excluding the capital, the average rent in the UK, at £861 pcm, is now 8pc higher than last year, which translates to a 10pc increase on pre-Covid prices.
The largest annual price increase occurred in the South West of England, with the current average of £948 pcm representing a 10pc increase on the same period last year, and a 12.6pc rise on pre-Covid levels. In fact, Scotland saw the most noticeable month-on-month rise, with the average rent gaining 4.4pc to £738 pcm in June.
By contrast, prices in the North East fell by 2.3pc to an average of £547 pcm compared to last month, one of only two regions to register a m-o-m price drop.
Landlords still ‘unfairly’ penalised
Andy Halstead, CEO of Homelet and Let Alliance, comments that although the Government, correctly in his view, applied measures throughout the pandemic to protect tenants, it didn’t go far enough to provide similar protection for landlords. He believes this is an ongoing unfairness that has existed for many years, resulting in landlords being penalised by higher taxes and increased bureaucracy when attempting to obtain possession of their properties.
Basically, he maintains landlords will pass on increased costs to tenants. Some landlords have left the market and the stamp duty holiday has stimulated sales, reducing the amount of stock available in the private rental sector (PRS). As a result, these factors are fuelling an increase in rental values for new tenancies which are well above the rate of inflation.
Halstead argues that the PRS plays a crucial role in the UK’s housing market and the flexibility offered by the rental market will be vital in enabling mobility across the UK as lockdown restrictions ease. The rental market will also offer affordable housing that suits the requirements of a varied mix of tenants.
Furthermore, he says the Government cannot afford to treat the rental sector as a sideline, because policies that focus only on home ownership will inevitably worsen the problems inherent in the UK’s housing market. The dynamics of supply and demand, he adds, will serve to drive up rental prices for the rest of the year and cause more records to be broken.
How Covid-19 has impacted the PRS
A dramatic change in tenants’ preferences has occurred, away from city centres to rural locations. In 2020, buyers leaving the capital purchased more than 73,950 homes outside London, a trend that was duplicated in the PRS. Tenants also expanded their search from 20 miles outside London to 40 miles, resulting in hotspots such as Bracknell emerging along the outer London commuter belt. Renters also desired larger homes with room for an office and access to gardens and outdoor areas, making the size of a buy-to-let (BTL) property a key factor for investors.
Property viewings, considered essential for prospective buyers and tenants, have prompted the market to diversify with video tours and online viewings replacing visits in person. The process of securing tenants has been streamlined, with online contracts now the norm for many estate agencies, allowing tenants and investors to sign and formalise rental agreements quickly and easily. Similarly, regular rental checks to ensure property remains in an acceptable condition and give tenants the opportunity to voice any concerns, have now moved online.
The resilience of the UK property market has attracted more investors to the BTL sector, with the number of overseas landlords now exceeding 184,000. The combination of technological progress within the industry and an increasing number of hotspots provides investors with greater choice of investment and a faster, more efficient rental process in one of the most bullish markets ever seen.