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Rental rates on the rise - Kate Faulkner, Designs on Property

Rental rates on the rise? Overview of the rental market 2009-10

Despite the number of people buying a home falling by half in the last 12 months, we have heard little about a different property market that has rocketed from a volume perspective and is currently signalling a rise in prices is on the way.

This year it’s estimated that the private rental sector will top two million people in comparison to the number of people buying and selling a home which has fallen to only 6-700,000.

Normally when property prices fall as they did in 2007 and 2008, rents increase. This was true up until September 2008 when we saw a sudden rush of frustrated sellers take down their ‘for sale’ boards and raise a sign ‘to let’! This dramatic increase in private rented stock caused rents to fall across the UK, and in some cases properties to lay empty for the first time.

Although this hasn’t been great news for landlords, letting agents have benefited from a booming business – especially in comparison to their estate agent cousins. Tenants too had a great time, picking where and what they want to rent while negotiating some fantastic rental deals.

However, this excess stock caused by ‘accidental landlords’ has now, pretty much, been soaked up by the increase in renting from those who would have typically bought by now. September 2009 saw, in most regions, the last of the rental bargains being snapped up and many areas are now stabilising, if not showing an increase.

A further dampener on the stock available has been fewer investors buying to let due to the requirement of a 25 per cent deposit and because they can't buy at a discount and then immediately re-mortgage. Both of these 'new rules' for BTL mortgages has slowed down investors’ ability to purchase, thus reducing rental stock. Finally, fewer new builds are coming onto the market, so generally there are less properties to rent. As a result, if you are looking to rent, it's best to tie down a deal NOW!

Two key renting indices track these trends, including www.findaproperty.co.uk, who advertises rentals and www.belvoirlettings.com which is one of the biggest franchised lettings business in the UK.

FindaProperty statistics show that the average rent in England and Wales is £829 a month, which is still 4.4 per cent down year on year, however it is up from an annual low of £819 per month. North East England is showing a small rise year on year (+1 per cent) while on the opposite side of the country in the North West of England, rents are still in a spot of bother (that’s good news for you if you are a tenant!) with income suppressed by over 9% year on year.

For those of you in Bonny Scotland, rents are down 4.3 per cent year on year, although delivering a much better average yield at 5.59 per cent (national average 4.56 per cent) while in Wales rental income is down by 3 per cent year on year.

In comparison Belvoir’s index shows signs of the rents being on the rise with the last two months indicating annual rents could grow to 7-10 per cent above what they are now.

Kate Faulkner

Kate Faulkner is MD of www.designsonproperty.co.uk and is author of six property books including four for Which? If you have any questions about property, Kate will aim to give you an independent answer for free.

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