Report Headlines
Belvoir Lettings “For England, Scotland and Wales where offices have been trading consistently over the last eight years, the average monthly rent is £755, a year on year increase of 3.4%.” (Apr 17 - E, W & S)Belvoir Lettings “For England, Scotland and Wales where offices have been trading consistently over the last eight years, the average monthly rent is £755, a year on year increase of 3.4%.” (Apr 17 - E, W & S)
LSL “Stable rental market, with growth moving away from the capital” (May 17 - E & W, index started in 2009)
ARLA Propertymark “Supply of rental properties in London drops by a third while rest of market plateaus” (Apr 17 - UK)
Countrywide “More London investors buy outside the capital than ever before.” (Apr 17 - E, W & S)
RICS “17% more respondents nationally expect rents to rise (rather than fall) over the summer and in terms of twelve month expectations, contributors are pencilling in around 2% headline rental growth over the year ahead.” (May 17 - E, W & S)
This is going to be a major year for rents. In theory, they should rise to compensate for the huge tax hikes placed on landlords – especially those in the 40% plus bracket. However, it’s clear to see from the data that so far, they are in fact flat lining or even falling slightly. If this carries on, bearing in mind inflation is nearly reaching 3%, any rental growth that underperforms this growth rate means landlords earnings are being squeezed.
With regards to ‘lead indicators’ it is really interesting that London appears to be seeing rental falls, despite the fact that demand is typically higher than supply there and as an economic powerhouse, it normally has the highest wage levels. However, it appears according to Countrywide this is due to an 11% increase in stock coming onto the market – possibly due to the slower sales market. It’s interesting to see that Wales is seeing the largest increase from LSLs perspective, as this seems to be fairly unique versus other indices, Countrywide for example shows Welsh rents fell by 2.5%, so the indices seem to be conflicting this month. However, looking at the ONS index it seems relatively clear that in the main, most rents are not rising above inflation across all regions.
Supply and demand
According to the RICS, tenant demand rose only marginally (on a non-seasonally adjusted basis), while new landlord instructions were again broadly flat. From ARLA’s perspective, agents had a few more properties to manage, up to 185 on average, up from 183 in March. We continue to get conflicting information on supply in London in particular with Countrywide saying stock levels are up by 11% and ARLA reporting they have fallen by a third (32 per cent) from 148 in March to 101 in April. Whether stock is higher/lower though, it is clear that rents are certainly not rising at rates seen before. Meanwhile, Agency Express which puts to let and let boards up, suggests that new listings and lets are down year on year, many by over 20%.
Yields
Yields continue to be put under pressure according to LSL. This is partly due to capital growth rising higher than rents, making it more difficult for landlords to drive a good return. However, it depends where you buy. The north/south divide is shining through with “the average property in the capital city returned 3.2% this month”. The South West (3.3% yield) and the South East (3.4%) were close behind. However, for those that are looking for good yields, you can almost double returns in the North East - where the typical property returned 5.2% - and the North West, where the average landlord saw a yield of 5%. The only area which maintained its yields was Wales. Landlords are going to have to work hard to generate good returns into the future, either by adding value or buying at a discount.
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