UK residential rental market is stable, according to analysis from consultants

Concerns about huge rents rises in 2012 have dissipated, market analysis shows

Residential property rents in the UK are showing small monthly rises in some areas and small falls in others, according to the latest analysis of the market from consultants Designs on Property.

It says that overall the picture is stable and concerns about huge rents rises in 2012 have dissipated. Rents are typically averaging around £700 to £800 per month and London you will pay more. But it is still possible to find a decent property for around £500 per month in many cities.

‘In 2011 there was a lot of hysteria around rent rises when the reality was rents were just recovering from falls of up to 20% back in 2008 and 2009. As rent levels are tied to what is happening with wages, many more tenants are trying to negotiate rent levels than before as the money they have left at the end of the month is being squeezed by government cuts coupled with the impact of inflation,’ said Kate Faulkner, manager director of Designs on Property.

‘In addition, although demand for rental properties is rising, we are also seeing an increase in the number of rental properties available, as such we are currently seeing rents flat lining in most areas,’ she added.

One new trend which is emerging, is tenants are being quite choosey about what they are willing to pay for.

‘Unlike the outdated view of landlords being multi millionaires who don’t care about their tenants and rent damp, mouldy hovels, today’s landlords are very different. Many are landlords who have bought properties to rent out until their kids are ready to move in or they can be sold to help fund another property for them to buy,’ said Faulkner.

‘As a result, they are typically in good areas, some brand new city centre apartments, and as they are investing for their kids’ future, the properties are well maintained with good landlords who sometimes even treat their tenants as well as they would if their kids were living in the properties,’ she explained.

She also pointed out that from a tenant’s perspective they are looking for a home now, not just temporary accommodation.

‘This better rental stock and rising tenant’s expectations means some properties are starting to rent out faster and at better rates than others. For the first time, bad landlords who don’t take care of the tenant and the property aren’t benefiting as much from increased rents and worst still, are increasingly likely to suffer longer voids too, potentially causing a cash flow nightmare,’ said Faulkner.

‘This is good news for both tenants and landlords as it means landlords who do a good job are rewarded with better income while those that provide poor accommodation continue to receive worse returns, perhaps encouraging them to change their ways in the future,’ she added.

A growing trend over the last few years is to rent a room. Faulkner said that this is partly due to higher quality room rents coming onto the market, both from institutional investment in say, student accommodation, to room rents aimed at professionals who would perhaps prefer to rent part rather than all of a property.

The Easyroommate index shows that room rents average between £300 to £400 per month and around £550 a month in London. Averages are 10 to 20% less than this time last year.

‘This drop in average room rates is likely to be due to the attraction of renting rooms to landlords from a yield perspective which is resulting in an increased supply. Average rental yields for a whole property in the UK is around 5 to 6%, whereas by renting rooms instead, landlords can secure rental yields of between 10 to 15%, almost doubling gross yields,’ explained Faulkner.

‘It is important to be aware though that some room rentals if they become homes in multiple occupation (HMOs), they need to be licensed by the local authority. There is no longer a standard definition of a licensed HMO, so it’s important to check this with your local housing officer. It is also essential to understand that although gross yields are great when you rent rooms, you have to measure the return based on profit ie net yield, as the running, maintenance and set up costs are a lot more than renting out a whole flat or house,’ she added.

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