A reduction in rental stock entering the market during the existing lockdown could result in higher rental costs for tenants, according to Ome.
The rental deposit replacement scheme investigated the percentage of buy-to-let mortgage loans approved over the last five years as a percentage of all loans.
The figures from the Financial Conduct Authority show that the number of landlords entering the market with new stock has slowly declined every year since 2015 with an average annual drop of 1%.
At the same time, the value of the buy-to-let market has also diminished at an average annual rate of 1% a year.
Despite a declining level of stock entering the market, there has been growing demand which has seen the average UK rent climb by an annual average of 4% each year since 2015, now at £743 a month compared to £627 in 2015.
The average cost of a rental deposit has also increased at an average rate of 3% each year over the last five years.
A similar increase this year would see the average rent hit £776 a month, while the average deposit would reach almost £900 despite the recently introduced five week deposit cap. However, Ome predicts that any lasting reduction in rental stock due to the current pandemic could result in a much larger increase in cost for UK tenants in the long term.
Matthew Hooker, co-founder of Ome, said: “Through no fault of their own, agents and landlords are facing a very tough few months with some tenants unable to pay their rent and some landlords facing much longer void periods due to a drop in market activity.
“The buy-to-let market has already seen a notable decline in appetite following increases to stamp duty and changes to tax relief, with the number of buy to let mortgages declining steadily since 2016. It is no coincidence that rents have also climbed rapidly during this time.
“As a result of these latest market developments, we could see many decide to exit the sector, or opting to refrain from a buy to let investment for the foreseeable future at least. This further reduction in stock would have grave implications for the nation’s tenants who have already seen the cost of renting increase due to an imbalance between demand and supply.
“The industry has already predicted an increase in rental costs due to the ban on tenant fees but with even less stock now likely to be available, this increase in rent and the upfront deposit required to secure a property could be far higher than predicted.
“Of course, there are things you can do to lessen the impact of this increase before it materialises. Looking for, and securing a property now, can be easily done online with the view of moving post lockdown when it is safe to do so.
“Opting for a deposit replacement scheme can also alleviate some of the upfront cost and essentially pay for your first month’s rent at the same time.”
|
United Kingdom |
2015 |
2016 |
2017 |
2018 |
2019 |
Average Annual change |
|
Buy to let (% of gross advances) |
16.81 |
16.04 |
13.43 |
13.02 |
12.96 |
|
|
change |
-0.76% |
-2.62% |
-0.40% |
-0.07% |
-1% |
|
|
Buy to Let VALUE - £millions |
37,424 |
40,129 |
35,182 |
35,731 |
35,661 |
|
|
change |
7.2% |
-12.3% |
1.6% |
-0.2% |
-1% |
|
|
Average rent |
£627 |
£643 |
£656 |
£677 |
£743 |
|
|
change |
2.6% |
1.9% |
3.2% |
9.8% |
4% |
|
|
Average Deposit |
£758 |
£766 |
£777 |
£790 |
£858 |
|
|
Change |
1.1% |
1.4% |
1.7% |
8.6% |
3% |
|
|
Sources |
||||||
|
Lending statistics - Buy to Let |
||||||
|
Average private rent statistics |
||||||
|
England |
||||||
|
Wales |
||||||
|
Scotland |
||||||
|
Northern Ireland |
||||||
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Who wants to join my sweepstake that with millions more out of work rents drop?
Agreed. Rents are more likely to fall rather than rise due to so many more people who have lost jobs and have little money. (Who are 'Ome' who - the article states - made that headline claim that rents could now rise? Has anyone heard of them? What was the firm evidence they used to make their claim?)
Aaah ha ha! 😂😂 who writes this. cr😝p?! Errr mass unemployment, world wide job losses, Internationally successful companies on the edge of going under and you or the OME think, tenants can afford higher rents? I’m reducing mine. It’s no surprise Landlords have little respect in the UK.
Rents are more likely to settle around the value of LHA, which has just risen.
Most rental properties aren't viable on LHA if there is a mortgage on it.
If LHA tenants are all you can get vetter selling off such dud properties.
Especially in the SE as yield will be zero or even negative.
Unfortunately there is still too much rental stock available.
Until we reach the happy point where we have at least 10 people chasing every tenancy then we will have too many rental properties.
We need scarcity to increase rents to realistic levels.
More LL need to sell up to match what will be declining demand.
Many tenants will be returning to mummy and daddy.
They won't need expensive rental properties.
Afraid most tenants are in service sector and that won't be around much longer.
Hospitality is NOT essential.
People will be saving their money and not using restaurants etc.
Many more will find working from home is effective so why bother living near work?
Move further out to cheaper areas.
So what if once or twice a week you have to travel into work.
I.5 hrs on a train can get you a long way from London in a nice cheap property.
If I was a London LL I would be desperate to sell up.
Demand will be for nice big houses with gardens etc.
There are plenty out there.
You DON'T need to live within the M25 to make working in London practical.
Working from home will be very attractive for employees and employers alike.
Big office buildings in London will become virtual white elephants.
Time for LL to invest in houses way out of city centres.
That is where the demand will be.
Southern coastal areas will see a revival as London workers move out to homes there.
They won't be commuting every day.
So a slightly longer journey once or twice a week is far more bearable.
Anywhere on the South and East coast with decent train connections to London will be in much demand.
It so happens that those areas are still relatively cheap compared to London.
Houses with gardens will be what tenants want.
A good 4 bed house can be let out to tenants all day every day and no Mandatory HMO Licensing costs to bother with.
Obviously pick areas where no Additional Licensing required.
Leave blocks of flats for the big corporates.
They can suffer the ridiculously high service charges etc
Small LL should gravitate towards houses with gardens.
Even better a house with parking on frontage etc.
We will see an exodus of workers from city centres to more pleasant surroundings.
We might even see employers respond the same way.
After all Barclays are emptying Canary Wharf.
They could easily set up in Margate!
I believe that with what will be more home working people will want more space.
If I was looking to invest then 4 bed houses maximum is what I would be looking for at max 15 mins walk to a Stn
This CV19 outfall is going to change tenant demand.
DON'T be a LL left with expensive flats in London.
They won't be wanted.
Get out to the sticks where quality of life is far superior.
As long as it is possible if required to commute to London then that would be a good location for rental property.
Let the dopey Chinese buy up all the dud flats in London.
Nobody will want them!
Paul, I just let to the 79th Enquiry ! Most just couldn't afford the rent which is at LHA level because they wouldn't qualify for a 3 bed rate. - so I wasn't going to let to them and wonder why there were shortfalls in rent in months to come.
No doubt some prospective new owners could be put off buying property and look towards the rental sector.
The real key is how much can people afford, this furlough scenario you can be sure the government will look towards clawing that back in the future people of course will have less disposable income. Lls also having more regulations forced upon us like the new electric certificate I certainly want the tenants to share my burden!
There are far more people looking for houses to Rent, than there are properties available.
Jacob, you are right the key is affordability. Tenants can't afford the Rent now so how can people talk about rent increases. I am £14k down in 6 weeks and expecting another hit next month probably 8 - £10k. People can't pay what they haven't got only the Benefit Tenants didn't miss. I believe there is no shortage of Housing, all hype, where are all the people living now, of course there are big Council waiting lists nothing surprising about that or how long it is, they all want to be on the Council and love a free ride. Stop Building thousands of unsuitable Flats clearly not required.
abolish shared ownership
This is what happens when you have retarded government officials making retarded decisions. They were warned, warned and warned again. They ignored.
This is simply not a viable business when you can't get interest relief and you face more and more red tape, more expenses and less rights.
Which mug would continue buying properties with these terms? We're treated like the enemy.
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