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Berlin-style rental rate freeze could send UK property market ‘into meltdown’

Germany’s rent controls place strong restrictions on in-tenancy rent increases, while the ‘rent brake’ introduced a couple of year ago makes it harder for landlords to charge higher rents when re-letting a property. But would a similar system work as far as the UK’s rent control system is concerned?

Last week the German finance minister Olaf Scholz voiced his support of a controversial five-year rent freeze to tackle the increasing cost of living in the city.

The aim, according to Scholz, is to ensure that Berlin does not ‘end up like London’.

In the last five years, London rents have increased from an average of £1,530 a month to £1,679 – an increase of 2.44% annually.Should this growth trend persist for a further five years, it would push the average rent in the capital to £1,894 a month. 

However, the implementation of a five-year rental rate freeze would see London tenants save a total of £7,620 in rental costs, according to the research.

Tenants in Newham stand to save the most, with rents increasing by 6.95% on average in the borough over the last five years, an increase of £329 in the monthly rent. If this continues, the average rental price could hit £1,977 a month in five years, but a freeze would see tenants save a notable £19,413 as a result.

A five-year rental rate freeze would also see a five-figure saving for tenants in Barking and Dagenham, Hackney, Waltham Forest, Tower Hamlets, Redbridge, Kensington and Chelsea, the City of London, Havering, Lewisham, Southwark, Enfield and Ealing.

While London is home to the highest rental costs in the UK and would remain the least affordable over the next five years, higher rental growth rates in other major regional cities mean that tenants outside of the capital could also stand to save big due to a rental rate freeze.  

Oxford tenants would benefit with a rental freeze saving totalling £17,746 over the next five-years. The average rent in Oxford over the last five years has increased at an average of 7.3% a month, second only to Manchester at 8%, which could see Oxford’s rental costs hit £1,741 a month.

Bristol has also seen a sharp increase in rental prices, up 6.75% annually over the last five years. A similar growth trend would see the average monthly rent hit £1,489 however, a five-year rental freeze would save tenants a total of £14,294. Tenants in Manchester, Oxford, and Newcastle would also enjoy a five-figure saving.  

Tom Gatzen, co-founder of ideal flatmate, said: “The figures suggest that should such a rental rate freeze be introduced in London and the wider country, the saving for tenants could be considerable. This saving could go some way towards a mortgage deposit and a foot on the ladder, while at the same time helping to alleviate some of the pressure on the rental sector.

“Any pro-tenant initiative can, of course, be viewed as a positive, but the mere suggestion of a rental rate freeze in Berlin seems to have sent the property market into meltdown. There is every chance that the same could happen here as a recent string of government changes to the buy-to-let sector have already diminished landlord confidence levels.

“This further dent on profitability could see more opt to invest elsewhere, however, the meteoric rise of the build-to-rent sector is providing a viable alternative to traditional stock supply and could therefore be the answer, stomaching a static rate of rental growth far better without any detriment to the tenant.”

Poll: Do you think a Berlin-style rental rate freeze could send UK property market ‘into meltdown’?

PLACE YOUR VOTE BELOW

  •  G romit

    If you don't think this is the Iast straw for Landlords short of experience expropriation of their properties, then what is?
    With over twenty new anti-Landlord regulations and taxes over the last couple of years enough is enough. Such a measure would see Landlords exiting en masses, homelessness would soar, house prices could crash, millions of ordinary home owners in negative equity, repossessions sky rocketing, and a full blown recession .ensuing.

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    Just vote for Jeremy and all this and more will be implemented.
    Be afraid be very afraid and don't vote Labour.

     
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    I don’t know why you are on about controls. I haven’t increased some in 5 years & others in 10 years . There is no 2.44% for me while at same time I have property in Acton vacant for months & can’t find suitable Tenants. The costs keeps rising including full c/tax plus all the Council rules to destroy us & for no other reason. Shelter at it again saying we should have same restrictions as Scotland which they say is working well but they used the figures from before it was introduced, how can anyone get away with a stunt like that, this is just like when they took our Deposits when they alleged 44% of Deposits were withheld by LL’s, it later turned out the real figure was less than 2%.
    I can’t understand why we are not allowed to run our business anymore.

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    This will just drive more landlords into moving to short term rentals and take thousands of homes out of the market. Councils will then need to house the homeless in the newly expanded short term rental sector, with no long term security of tenure and much higher rents charged.

    Governments need to understand that it's no point controlling the cost of something if that action makes the thing unavailable. The SNP did this in Scotland by abolishing hospital car park charges. It's now impossible to get parked at hospitals after about 8.00 am as local workers are hogging the free spaces for 10 hours a day. Affordable market rates balance supply and demand. Anything else just distorts the market and adversely affects those who need the things being interfered with.

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    What's quite funny in this is that Berlin doesn't want to end up like London, who in turn doesn't want to end up like Berlin.
    To what extent the Berlin property market is in "meltdown" is yet to be seen. The rent freeze was approved yesterday so I think using words like meltdown is sensationalizing the story.
    Germany have far stronger controls on the private rented sector and seemingly less problems, it'll be interesting to see how this plays out.

  • John Corey

    The UK BoE inflation target is 2%. While 2.44% is higher, it is very marginally higher. In other words, rents are inline with inflation so there is no need to change anything to address rents increasing.

    The goal of an inflation target is prices should rise close to the target rate. It sounds like rents are inline. Rather than a problem, the data implies things are exactly where they were expected to be.

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