Belvoir Predicts that Rents will Rise at Faster Rate in H2 2019
Emily Morley - April 4, 2019
Letting and estate agent Belvoir predicts that rent prices will rise at a faster rate in the second half (H2) of 2019, according to its latest rental index.
The Belvoir rental index for the fourth quarter (Q4) of 2018, prepared and analysed by property expert Kate Faulkner, shows significant regional variations in rent prices, with a slightly average decrease of 1.25%.
However, the agent expects rents to increase at a faster rate in H2 2019.
The CEO of Belvoir, Dorian Gonsalves, explains: “Belvoir’s rental index tracks advertised rents, and the Q4 index revealed that there was an average year-on-year decrease of 1.25%, which equates to £1 per month, compared to the 2017 annual average.
“We have consistently reported that rents are only able to rise if wages increase higher than inflation, and rents cannot rise purely because of any increases in landlord costs. However, the Q4 rental index confirms a significant variation in rents from region to region, and, where rents are able to rise, they are doing so.”
He looks at the figures: “Average monthly rents in Q4 ranged from £605 in the North West, £662 in the East Midlands, £733 in the South West, through to £1,033 in the South East and £1,328 in London. Interestingly, we are also seeing a dramatic variation in rents within London – from £1,199 in Uxbridge up to £1,542 in Kingston upon Thames. It is therefore quite challenging to secure a year-on-year trend for this region, but, overall, average Q4 rents remained static, due to falling affordability buffers.
“Analysis of property types confirmed that 60-70% of rents for flats and two to three-bedroom houses remained fairly static, but with four to five-bed houses – where we have seen a stock shortage, higher demand, and tenants with slightly more money to spare – rents have increased.”
Gonsalves assesses the market: “Looking at tenant trends, we found that tenants are remaining longer in properties, with a slight increase in the proportion of tenants renting 13-18 months and over two years, when compared to Q3. 64% of offices carried out no evictions in Q4 (an increase from 54% in Q3) and half of Belvoir’s offices reported less than three tenants in arrears. Those tenants who do fall into arrears are much more likely to do so because of sickness or job losses, rather than an inability to pay due to rental increases.
“Our analysis of landlord trends in Q4 revealed a similar number of landlords selling up to three properties compared to Q3, and a decrease from 28% to 23% for landlords selling four to five properties. The main reasons for landlord sales are tax changes, constant regulation and legislative changes resulting in less returns, and some landlords choosing to release capital or move back into properties themselves. The number of landlords buying properties continues to fall (32.3% bought in Q4 compared to 37.9% in Q3), which has added to stock shortages.”
He gives his thoughts on how Brexit uncertainty is affecting the housing market: “Historically, during times of political uncertainty, as is being currently experienced, Belvoir offices have observed a rise in the numbers of families renting properties, as they wait to see the impact on the market and their personal situation. In recent years, there has also been a shift in the corporate relocation market, with employees opting to rent out their existing property instead of selling, and then renting a house in the new area. This has resulted in less rental houses coming onto the market, with increased demand for those properties that are available.
“As political uncertainty continues, it will be interesting to see how the private rental sector will be affected throughout the rest of 2019. After a relatively flat period of rental inflation, we are predicting that rents will begin to increase at a faster rate in the second half of the year, as landlords and tenants begin to feel the effects of increased costs, which are a direct result of the tenant fee ban.”
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