Guild of Landlords Rent Digest – April 2021

Landlords who have seen falling rents across London may be in for a reversal of fortune. 

A survey published in April 2021 of the five-year cost of renting 900,000 homes covering every London suburb shows rents have dropped in two out of three neighbourhoods. 

The main reason is workers are no longer turning up every day at city centre offices, so they have opted to move out to cheaper areas with larger properties so they can work from home, says the property portal Rightmove. 

The area with the most significant fall in rents is Finsbury, on the edge of the City financial centre. Average rents are £2,147 a month, which is £670 a month cheaper than five years ago, when tenants paid £2,818 a month. While rents have gone down, the amount of available homes to rent has increased by 76% compared to a year ago. For landlords, the good news is letting agents expect to see rents rise soon.

Richard Davies, head of lettings at Chestertons said: “Prices are the lowest we have seen for several years and represent incredibly good value for those tenants thinking beyond lockdown and looking to lock-in to a good deal. As the country starts to open again, we expect growing numbers of tenants to return to the more central areas and anticipate that rents will quickly start to recover.”

Outside London, rents are buoyant due to a surge in demand and few homes on the market, says the report.

Rent rises hit a plateau, says official data

The official rent tracker from the Office for National Statistics (ONS) says rents were up 1.3% in the year to March 31, down from 1.4% in February. 

The ONS Index of Private Housing Rental Prices has shown a consistent monthly average rise of 1.4% since January 2020, with only a nudge of 0.1% either way in a few months. 

Landlords in Wales are enjoying rents rising the fastest – 1.5% in the past year, compared to 1.3% in England and 1.0% in Scotland. 

Rents excluding London grew by 1.7% year on year, while tenants are paying just 0.5% more in the capital. UK average rents have increased by 10.2% since January 2015, when the ONS started to record data.

Rents by region in England

Landlords in the South West are seeing the fastest rental growth, with average rents up 2.4% in the year to March – a 0.1% increase in February. 

The worst regional performer was London, where rents were up just 0.5%, followed by the South East at 1.2%, says the March ONS Private Housing Rental Price Index

Tenants paying an average of £922 a month

The average UK buy-to-let rent is £922 a month, according to tenant referencing agency Homelet. 

The figure is a gain of 0.8% on the month before and an increase of 3.4% compared to March last year. The agency says rents in London fell 5.2% - dropping for ten months. 

The South West was the region with the highest yearly rent rise – up 8% since March 2020. Chief executive Andy Halstead is forecasting record rent rises later in the year.

"Property professionals know that the private rented sector works best when there's balance. Ultimately landlords want good tenants, and tenants want a quality property at an affordable price,” he said. 

"With almost one in five people living in the private rented sector, it's fitting that the government should focus on it, with an informed policy that strives to achieve a balance between letting agents, landlord and their tenants, but unfortunately that isn't the case now. The continued increase in rents above the rate of inflation is a symptom of current policy. 

"Property is a long-term investment, and the narrative that landlords and letting agents are driving up rental costs simply isn't true. "

As demand increases, the UK needs more rental stock for tenants, not less and without policy informed fully by property professionals, rents will rocket to record levels this summer."

Homelet – Average rents by region for March 2021

Source: Homelet

Guild of Landlords Rent Digest – FAQ

For landlords confused by the stats and what they mean, here are some answers to the most asked questions about rents.

Why do the rent indices show different results?

Check the data carefully. Different indices cover different periods, and the samples vary between reports. The ONS has the biggest sample, so it should return the most reliable figures, but the time taken to collect and analyse the statistics often means the ONS data lags behind the rest of the sector. ARLA derives insights from letting agents and provides what’s known in the trade as a sentiment survey rather than solid data. Homelet statistics are based on customer data, which may not fully reflect the market.

Should landlords raise rents in line with the stats?

That’s a business decision for landlords. The rent statistics indicate how the market is moving but do not reflect demand from tenants and property standards in local neighbourhoods. Don’t forget the data is historical, so it gives a picture of what’s happened rather than what will happen.

Which rent index is the best?

That’s up to individual landlords. For instance, one index with a strong customer base in the same area as a landlord’s portfolio may align more closely with market rents for that neighbourhood. Average data is not much good if you don’t have an average home, and median rents will cover everything from a room in a shared house to a four-bedroom home. Extra research with local letting agents will likely give a better view of where a landlord should pitch a competitive rent and stop them from underselling.

How has coronavirus disrupted the statistics?

Although several letting agents and property organisations publish regular rent statistics, many have been affected by the coronavirus lockdown that has their reports suspended or delayed.