Which way for rents?

19 January 2017


As many landlords and tenants ponder which way for rents, up down or unchanged, we look back at what happened last year and forward to what might happen this.

Rents for residential properties – what happened in 2016 and what are the prospects for 2017?

Rents in 2016

Based on the latest rental price tracker released this month by Rightmove, asking rents rose by 3% in all regions except London.

This rise is lower than the 3.7% registered in 2015.

There were, as ever, regional variations with the highest growth recorded in the northern regions of Yorkshire and the Humber and the North West.

London saw an overall decrease of 4.4% in prices, split between a 5.2% drop in Inner London, and 2.5% outside.  The consensus view for the fall was the increased availability of rental stock across the capital.

Per Rightmove the top three highest rental growth areas in 2016 were:

  • Swansea reported an 11.4% annual increase
  • Gillingham, Kent where asking rents were up 11.1%.
  • Bath which had a 10.5% increase.

The top locations for demand from tenants on Rightmove was dominated by the north, including Ashton-Under-Lyne and Oldham in Greater Manchester, and Stockport in Cheshire. In London, more affordable areas such as Rainham, Bexleyheath and Erith came top as tenants looked for better value in Outer London.

rents in 2016

Prospects for rents in 2017

Looking ahead the fundamentals are likely to result in less availability of rental stock compared to demand, which will put upward pressure on rental prices.

Heightened uncertainty in the sales market is likely to mean that potential first-time buyers delay purchasing decisions and more new households start off renting.

Rental prices are usually closely tied to wages and unemployment, but increased demand from tenants will provide some support for rental growth rates.

The consensus amongst property professionals is that asking rents outside London will rise in 2017.  Below are the opinions of a variety of experts from a cross section of the property industry.

Sam Mitchell, Head of Lettings at Rightmove predicts a 4% increase outside of London.

Fionnuala Early, chief economist, Countrywide also predicts a 4% increase.

Simon Rubinsohn, chief economist, Royal Institution of Chartered Surveyors is forecasting rents: up 2-3%

Ed Stansfield, property economist, Capital Economics rents: up 3%

Ryan Tuff (mortgage adviser) rents: up 3% (less in London)

Melanie Bien, property expert and commentator, predicts average rent increases of 2%

Jonathan Davis, economist and wealth adviser and owner of Jonathan Davis Wealth Management is a dissenting voice forecasting no change in rents over the next 12 months.  His view is that “The UK is heading towards recessionary conditions, which means lower growth at best, and it could mean negative growth. We have not had a recession for eight years, and they tend to come every eight to 10 years. Earnings are not rising much but costs are, so standards of living will be flat, if not falling. The economic indicators are not good, which is why I do not see growth in house prices or rents.”

Rents – Local Variations

As with all markets, local conditions and circumstances will dictate a certain amount of variance in rental values and how much they rise or fall. The continuing shortage of affordable housing in the sales market means it is hard to see past the prospect of strong demand continuing in the rental market.  Despite concerns about affordability this increased demand will have an inevitable consequence that rents will continue their upward trend to a greater or lesser extent.

Property Investment

If you are a potential landlord seeking to invest but are unsure about whether building a rental portfolio is right for you, please get in touch as we have the experience of helping many people in similar situations take their first steps into property investments.