The Landlords Revenge

At long last some better news for landlords! It would seem now that mortgages are becoming increasingly difficult to obtain for first time buyers that landlords are spotting the opportunity to raise rents.

Latest figures show that that landlords pushed up rents for the fourth consecutive month in September, raising them 1.2 percent. This followed a 1.4 percent increase in August. Over the last three months, national rents have risen annually at a rate of 13 percent.

The ‘average’ UK rent is now £669 but still remains 2.5 percent lower than a year ago. Not surprisingly, the strongest growth has been in London and the South East. But, there are several regions which are still seeing rents flat-lining. For example, in the South West, Yorkshire & the Humber, the West Midlands and the North East, ( which is basically most of the rest of the UK!) rents are either treading water or slightly down.

What’s Happening?

David Brown of LSL explained: “The key is tenant demand. Only 166,000 first time buyers have bought a home in the last 12 month.They have been frozen out of the market by lenders restricting mortgage availability, despite homes being more affordable than any time since 2003. There are 200,000 fewer first-time buyers than the average for the last few years. These people are accumulating in the private rented sector, keeping demand high and allowing landlords to keep rents relatively high too. Almost two fifths ( !) of the UK’s tenants live in London and the South East, where house prices are highest, and supply is most constrained. Unsurprisingly, landlords therefore have greatest pricing power in these regions so rents are now rising rapidly. The housing market recovery began in London and the South East and the rental market is now following suit.”

( NOTE: Of course this is not our view regarding the housing ‘recovery’- these guys are agents after all!)

However, lots of landlords are also struggling to get a mortgage. The CML figures show only a third as many buy to let loans were made in the first half of this year compared to the year before.

As we have said previously, this further restricting supply in the rented sector at a time of real housing need and is causing rents to rise faster than they would otherwise do. Landlords who may have had to drop rents earlier on the year when a glut of housing hit the market, are now beginning to make back some of the losses they may have incurred by doing so.

The good news is that the tenant mix overall is changing too. There is a large increase in high quality would-be first-time buyers who are now choosing to rent who have solid finances. This means that rent is more likely to be paid in full and on time.

Yipee! happy days eh?

‘Down our way’ we certainly had to change our tactics to get tenants in. We also had to suffer more tenants that we willing to barter with you over rent levels. Hopefully some landlords at least should be able to start taking advantage of the new situation as it arises. Though, from the figures it would seem that London and the South East are the main contenders so far. It remains to be seen how long it will be before other parts of the UK follow suit.

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