The private rental market in the UK should prove to be interesting in 2014 as the Help to Buy mortgages scheme is set to get more first time buyers into the market but a lack of new housing means supply remains tight. Reading between the lines it looks as if most experts expect the rental market to remain strong although there could, of course, be regional variations.
The latest index published today from Sequence, which has a 300 branch network which includes Barnard Marcus, William H Brown, Fox & Sons, shows that national monthly rents in the UK increased 8% annually in December to £763 and this was despite a seasonal dip of 2% month on month. Looking more closely at the numbers reveals the strength of the market with the number of new tenancies agreed up 13% annually.
And it is by no means all happening in London, indeed the capital city has seen average rents increase annually by just 3% to £1,417 and number of new tenancies was up 11% annually, slightly less than the UK average. There is a common misconception that when the sales market is booming the rental market lags behind, but our figures disprove that theory entirely but the annual growth of rents across the UK highlights that demand is there for rental property despite the government’s flagship Help to Buy scheme which has seen strong interest.
Sequence expects the number of rental transactions to continue in 2014 and points out that the first two weeks of the year have seen a 6.5% increase month on month in new properties available to rent. What is also interesting is the experimental index started in January 2011 by the Office of National Statistics that is currently undergoing evaluation. It shows that in the 12 months to December 2013 private rental prices paid by tenants rose by 1%, down from a 1.1% increase in the 12 months to November 2013.
But rents were up across the country with growth of 1% in England, 1.3% in Scotland and 1.2% in Wales. In England rents increased the most in London at 1.6%.
The index measures the change in price of renting residential property from private landlords, thereby allowing a comparison between the prices tenants are charged in the current month as opposed to the same month in the previous year. The index does not measure the change in advertised rental prices.
Indeed, all the regions have experienced rises in their private rental prices since 2011. Until April 2013, the annual rate of change in the IPHRP had been higher in England than in Scotland or Wales. However, the annual rate of change has been increasing in Wales and Scotland since late 2012 and by December 2013 was higher in these countries than in England.
When you look at asking rental prices, then these have also been rising. The average asking rent peaking at £986 per month in November 2013 at a time when rents typically dip due to the beginning of the festive season, according to the latest Move with Us index.
But the picture is not universal. While there were significant increases in average asking rents in regions that typically experience slower growth rates, some of the stronger regions saw rents fall in the fourth quarter of 2013.
For example, the North East saw an average rise for the quarter of 9.16%, Wales was up 9.62% and Yorkshire and Humber up 6.38%, but prospective tenants in the strongest performing regions of greater London and the South East saw rents fall. There is an expectation that average asking rent prices could surpass £1,000 per calendar month in 2014.
The UK desperately needs more houses to be built and numbers are unlikely to keep up with demand in the coming years and the fact that there is more buy to let mortgage choice combines to mean that the rental market is looking likely to remain strong.