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TODAY'S OTHER NEWS

A shortage in home lets is driving up rental prices in Britain to record levels

The UK has a chronic undersupply of housing. This is not news; it’s just a statement of a fact which has been known for many years now. What is news, however, is that the pool of rental properties is shrinking and as a result rental prices are rising.

Available lets hit new lows and asking rents hit new highs

Up until this quarter, the lowest number of available rental properties was recorded in quarter three 2015.

This quarter, however, the number of rental properties available was 13% lower than the previous record, although, as is often the case in the property market, there were wide variations in this, for example, in London the drop was a massive 24%.

It is therefore hardly a surprise that asking rents are also up. Nationally they were up by 3.2% year on year and by 1.3% quarter on quarter while in London they were up by 5.6% year on year and by 2.2% quarter on quarter.

Asking rents now stand at £828 per calendar month outside London and £2,104 per calendar month in London.

There is, of course, a difference between asking rents and rents achieved, but further data shows that average rents are also on a clear upward trend, especially in the economic powerhouses of Manchester and London.

Between August 2018 and August 2019 average rents in the North West (which is dominated by Manchester) increased 3.3% to £741 per month while average rents in London increased 3.5% to £1,698 per calendar month.

In other words, whatever way you look at the situation, life is getting more expensive for the average renter and even more expensive for renters in London (who were already paying the highest rents in the UK).

Record rents does not mean record profits for property investors

In spite of what the above figures might suggest, as a whole, property investment has not suddenly become more profitable (nor has it suddenly become less profitable), which it has become is an area which requires more up-front and ongoing investment, the cost of which is then passed on to tenants.

Basically, the government has vastly increased the level of regulation in the private rented sector, which, in general terms, may have been a benefit in the sense that it has helped to drive out rogue landlords, but it also had the effect of driving out good landlords who managed their properties very effectively, but didn’t fancy dealing with increased administration or facing the costs of being fined for non-compliance due to administrative errors rather than wrongdoing.

Many small-scale private landlords have already exited the market and research suggests that more will follow, or will at least reduce the size of their portfolio.

This is potentially good news for renters who can afford to buy, but terrible news for those who can’t as it has effectively meant that the pool of available rental properties has shrunk further than the pool of tenants in need of them.

In the long term, this issue may be resolved by increasing the housing stock, including (and perhaps especially) build-to-rent developments, but this solution could take a very long time to implement.

Mark Burns is the managing director of property investment company Pure Investor.

  • phil dillon

    There is only one reason for the reduction in Property available and that is S24. Why would anyone in business agree to be taxed on Turnover.

  •  G romit

    "....may have been a benefit in the sense that it has helped to drive out rogue landlords....."

    No it hasn't because there is virtually no enforcement.
    So good Landlords exit the PRS, leaving..........
    Yes you guessed it' leaving rogue Landlords', who now have free reign.
    GUN, FOOT, SHOOT!

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    Yes G. Perhaps we could see some evidence of this phenomenon of bad landlords exiting. I'd find that most interesting.

     
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    Rent Smart Wales, where I am, are pretty much just a register and licence debacle.
    They are not proactive in seeking out rogue landlords and are really not that much use, except inconveniencing genuine landlords.

     
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    Well we didn’t see this coming did we 🙄

  • Paul Barrett

    Yep I'm one of those S24 LL selling up.
    In addition to S24 it would only need IR to rise and I'd be bankrupted.
    So I'm leaving the PRS making 14 tenants homeless.
    Not my problem and I really don't care what happens to them .
    Govt has made me not care Govt is the one making my tenants homeless.
    I intend to become a lodger LL where Govt can't interfere in my business.

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    Responsibility for the shortage of Housing rests solely on the shoulders of consecutive governments.
    It amazes me that current politics in housing bow to the 'pressures' of the liberal elite and champagne socialists. Mark my words, when Section 21 is abolished, you will see the collapse of social housing support from the private sector. Overnight the housing shortage in the UK for the most vulnerable will go from a dire to catastrophic. Why would the private sector 'gamble' when possession is so chronically difficult for them?
    We can all see the writing on the wall; it belies belief the so called 'intellectuals' that create policy cannot.

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    Leave the ''dross'' element to councils and housing assocs', why would we want them ?

     
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    tories are really socialists

     
  • Paul Barrett

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    Phil, there are several other reasons in my book not just section 24, might I add Section 21, Article 4, Fee bans, Deposits debacle / replaced by a system worse than no deposits if that were ever possible which means I don't have Deposits for years that's how much I hate it, removal of wear & tear which was there as long as letting itself, Right to Rent registration & checking Tenants which seems to be impossible if outside EU, How to Rent information pack by Shelter not fit for purpose & should be scrapped as they have changed it 9 times since introduced in just 5 years and if you didn't serve the latest one you are barred from using S.21 I have had to print dozens of those & trow away because they immediately became obsolete, De-Reguraction Act to allow Tenant to damage your property, Licensing Schemes hugely expensive and time consuming & I had to re-license some for the third time, only applies to some LL's if you don't house mammy, daddy, grand pa, sons , daughters, cousins, nephews, aunts, steps, maids, etc, that's fine and that culture usually on Benefit and control every Civic Center in the Capital but mustn't say that so I digress. So far more than Section 24 has driven us to the wall + building thousands of Flat clearly not required hitting the tax payer. I see there are supposed to be 12'000 on waiting list in one London Borough & 20'000 in another so they are all living some where now / mostly with private LL's, if you re-house all those persons who's going to be living in the property the just vacated ?

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    I think it's another ridiculous idea proposals on stopping LL's from gaining possession or even getting vacant to sell without their permission. Its non of their business whether we want Sell / buy / sell or keep, we didn't need their permission to buy or received any of their funds. Why then should we need their permission to dispose of a Property that we bought paid for at no cost to them but supplied to the market for free. I see all this talk about if you want to live there yourself or want it for a family member making those kind of conditions to favor the same people that are being favored by current policy's, it doesn't take much working out who's in the Offices making those rules to suit their relatives on outside. I Built some of my own houses by my own hand with only hand tools no electric on site & cordless tools yet to be invented in years gone by without any help or state funding, so I was build to Let before the schemes were invented, now I am supposed to roll over and give it to someone that possibly never done nothing and at 20% discount according to Mr McDonald, again pull the other one its got bells on. When & if they are making those changes about what the circumstances should be for recovery of possession whether for sale or otherwise of the property don't forget to give the LL's of self-build to let at least the same rights as the favored privileged Family connected persons, surely not milking the system ?.

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    remember MPs are benefit recipients and pay no tax

  • Paul Barrett

    If the day ever comes when a Govt determines under what circumstances a LL may sell their property that will end the PRS.
    There seems to be an idea abroad that just because a property houses a tenant that the owner of that property cannot sell it or do whatever he likes with it.
    If that means the tenant has to go then that is what has to occur.
    Tenants have no God given right to retain a tenancy no matter how inconvenient for them.

    All tenants should know that beyond 6 months they have no security of tenure.
    However as it is likely that the LL wishes to remain in business then that is the security of tenure!!
    Any business must be entitled to close down if they wish to or change business model.

  • Paul Barrett

    The other constant incorrect propaganda which is quoted by the original article is that LL selling up introduces more supply for FTB.
    No it doesn't.
    There are already plenty of properties for FTB to buy well before any LL determines to sell a rental property.
    Adding more properties to sell doesn't magically mean a flood of FTB will buy.
    This is the ridiculous propaganda espoused by dopey Osborne which was the alleged pretext for S24.
    All complete and utter twaddle.

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    Many of mine come out of auctions and have suffered structural damage / movement in the past, as such a FTB would be very unlikely to get a mortgage on them.

     
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    hundreds of thousands of part buy-part rent are still available--i wonder why?

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    Shared ownership - biggest con going.

     
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