The UK rental market has seen a dramatic rise in rents this year, with prices reaching an all-time high and seeing a record rise. This is especially true of the London area, which is driving the entire UK market, to some extent.
However, for those not able to obtain social housing, should the trend continue, then it’s likely that we will see low-to-middle income families become priced out of the market altogether in some areas.
June of this year saw an average rent of £811 per month, according to the HomeLet Rental Index; a 5.1% rise on 2012. Indeed, in June, there was a 3% rise on May. This gives the impression that it’s going to be a continuing trend, but landlords should consider carefully before cashing in and raising monthly payments.
Country following London
Whilst the above monthly figure is the national average, in Greater London rents are even less affordable, with the average being £1270 per month, which is the highest since last September.
“During this time of year, we do generally see an increase in the number of people renting a new home – particularly students who move into higher yield properties – which therefore pushes average rents up," said Andy Richards, HomeLet’s business development director.
However, Mr Richards also said that income is not rising in line with rental inflation, with the average wage rising just 0.8%. This means that rents are rising at a rate with which tenants just can’t keep pace.
"With recent reports of increased tenant rent arrears, it appears that maybe those renting a property just cannot afford spiralling living costs," Mr Richards said.
Landlords must be sensible
This means that whilst it’s tempting to cash in on the rise in rents, landlords should take care and think before they help to push prices up higher. This is especially true of the London area. Many families just can’t afford to live in and around the city anymore and this is becoming increasingly the case.
Landlords need to bear in mind that pricing families out of the market means that there will be more choice available to those that can afford it and it also means that there’s a real danger of lots of empty rental properties coming onto the market that will continue to sit empty, as nobody is prepared to pay an inflated rent.
“I believe increased mortgage availability and confidence in the buy-to-let market could lead to a rise in the supply of rented homes to potential tenants. This could then help to slow the rate of rising rents, which would stabilise the market,” Mr Richards said.
Whilst of course being a landlord is a business venture above all else, it’s true to say that landlords have a certain amount of social responsibility. It’s also necessary to recognise the danger of ‘cutting your nose off to spite your face’, to coin a tired old cliché.
Landlords that cash in on the current trend for rising rents might just find themselves with a property that they can’t let, if they continue pushing up prices.
According to Shelter, 26% of families said in a survey that they had faced a rent rise in the last year and the survey also revealed how much families are struggling to cope. The study, which surveyed 4300 private renters, also found families to be cutting back on ‘luxuries’ in order to avoid arrears:
1 in 3 said they are cutting back on birthday and Christmas gifts
1 in 4 said they don’t visit family and friends as much
1 in 7 use a credit card to pay rent
1 in 12 parents that rent say they have borrowed money from their children in order to meet the rent
6% of renters have had to move due to rent increases (515,000 people)
Campbell Robb, Chief Executive of Shelter, said: “This is proof that the growing cost of renting is hitting families where it hurts, forcing them to make impossible choices about what they can cut back on next.
“When families are forced to resort to taking money from their children’s savings or paying their rent on a credit card, it’s a clear sign that sudden rent rises are pushing many ordinary families to the edge.
“If the Government wants to make life easier for ordinary families, it has to reform our expensive, unstable rental market.”
Bearing all of this in mind, landlord’s need to be careful that they don’t force the kind of reform that will hurt the market overall in the long term. Added to this, especially with regard to London, is the very real possibility that pricing families out of the area will lead to a slew of empty, un-rentable properties.