Each year the Homelet Rental Index makes for great reading when trying to understand trends and patterns in the rental industry. Dealing with tenancies from over 3,000 agents a month Homelet are best placed to provide accurate, up-to-date figures. They are able to work on rental prices achieved, rather than those advertised, and how these are spread across the country and how this may affect the rental sector as a whole.
In March 2012, the average rent was £764 – a 5% increase on rents achieved in March 2011. On average over the last three months the South East and East Midlands have seen the most stable rents in the UK with an average monthly variation in rents of just 0.3%. Greater London & the South East had the highest variations in annual rental values. Rental values in the capital were 6.1% higher in March 2011 than in March 2012, bringing rents from Greater London to a huge 75% higher than the average rents in the rest of the country. This once again leaves the East Midlands, North East & Scotland as the most affordable areas in the UK.
So whilst rents are rising, if only marginally in some areas, what of the tenants who are currently renting? The average tenant incomes in the capital were 3.5% lower than March 2011. Ian Fraser, Managing Director of Homelet, commented:
“Tenant incomes appear to be rising at a much slower rate than they were 12 months ago. It is likely that incomes could remain flat for many tenants in 2012, and with inflation remaining high and average tenant incomes not growing at a proportional rate, tenants budgets will continue to be stretched. With many economists expecting levels of unemployment to rise, the increased risk of rental arrears is bad news for both tenants and landlords”.
Average UK rents grew by 2.6% from February to March – the biggest monthly increase in rental values since August 2011. As a Landlord it is hard to hear figures like these and not wonder whether you are getting the maximum rent for your property possible, but consider this;
As shown, tenant’s income is not growing in proportion to rent rates, and as attractive as raising your rental figure to compete with the market may be attractive – there is also a lot to be said for loyal, considerate tenants who have always paid rent on time and cared for your property. Stretching them to the point where rent may fall into arrears in the long run could cost you more. Similarly, we are seeing more and more landlords wanting to re-market at renewal point as they believe that they can achieve higher rents on the open market than they are currently receiving. Whilst in some cases this may well be true, again can you put a price on a long term tenant who looks after your property and pays their rent on time? When it comes to renting, receiving high rent is not the be all and end all.
In this time of economic uncertainty it is also advisable to ensure that you as a landlord are fully covered for every eventuality, and rent guarantee insurance really is a must. As great as tenants may be when they move in, noone can predict losing their job and suddenly being unable to pay their rent.
To ensure long term growth after the economy has recovered, the private rented sector has to offer value for money, and whilst demand is high, it’s important that the quality of rental stock in the private rented sector does not deteriorate. Reagan Bradley