The turbulence of the last 10 years of the Private Rental Sector (PRS) is charted in Belvoir’s unique Decade of Data report – available now to view online.
The report, produced by Kate Faulkner, analyses information from a cross-section of Belvoir offices which have traded for 10 years, providing a fascinating insight into the rental market, with all its regional variations, and showing the reasons behind fluctuations in rents.
Belvoir CEO Dorian Gonsalves said: “Because Belvoir began reporting in 2008, it puts us in a unique position to produce this report. Many other rental indices only date back to 2010, meaning they began recording base rents when rents were already at an all-time low. This is what later led to inaccurate media reports of rents ‘rising rapidly’ or being at their ‘highest’, when in reality they were still recovering from falls during 2009 and 2010.”
Effects of the recession on the rental sector
The report records a period of “boom to bust and back again”, including the impact of the recession on the rental sector:
The earliest data, from 2008, shows the PRS on a high, with landlords were seeing 10% increases in rents, which were averaging around £678 per month;
The credit crunch, which began later that year, saw huge numbers of people letting their properties, after struggling to sell them;
This resulted in a big increase in the number of rental properties, triggering falls in rent by around 5% in London to 20% in areas such as Nottingham;
A 50% drop in the number of buyers increased demand for rental properties.
Dorian Gonsalves said: “This ‘switch’ in tenure from home ownership to the PRS was not down to evil landlords or greedy agents crowding out first-time buyers, but was simply due to the fact that people had no choice but to let their properties as they were unable to sell.”
Which regions bounced back from the recession?
London rents recovered from their falls relatively quickly, with average rents in 2012 matching rents achieved in 2007/8, remaining static from 2013 through to 2015.
On average, in the South East, West, East Anglia and East Midlands, rents did not increase back to the heights of 2008 until 2014 – six years later.
In the West Midlands and Yorkshire rents were recovering to previous heights in 2010, then remained relatively static until 2012.
In the North West rents have been relatively stable throughout the last 10 years.
What factors control rental increases?
As shown above, some Belvoir offices saw rents take nearly a decade to begin to recover to previous levels, and the report highlights the reasons behind this, confirming that wages are the biggest driver of rent increases.
Rises in average rents are typically below inflation – this is reported by both the Belvoir rental index and the Office of National Statistics;
Rents generally move with wages rather than house prices, inflation or landlord cost increases;
Slow recovery in rents is also likely to be partly linked to tenant referencing and insurance companies requiring tenants to pass 2.5 to 3 x salary affordability tests.
Dorian Gonsalves said: “House prices can continue rising irrespective of what is happening to wages, but rents will flat-line when wages rise at less than inflation or at a similar level.”
What other changes have Belvoir seen in the past 10 years?
Growth in the percentage of rented two bed flats versus two bed houses, coupled with an increase in three bed houses;
Tougher competition for agents; in 2008, 80% Belvoir agents competed against fewer than 30 agents. Today almost 75% of agents are competing with more than 30 agents, and 20% are competing with more than 100 agents.
Increasing tenancy lengths, with most tenants renting for longer than two years.
Dorian Gonsalves said: “Thanks to our robust referencing systems, Belvoir has virtually no evictions, so the message is clear, that if a tenant goes to a reputable agent they will have almost zero chance of being evicted.”
Looking ahead
Dorian Gonsalves said: “Looking to the future of the PRS, Belvoir is asking for more regulation and increased policing of rogue landlords and agents. Our franchisees are also requesting less government interference with regards to landlord taxation and encouraging more landlords into the market. Government policies, which aimed to drive people out of social housing and into the PRS, combined with a lack of house building, has created, rather than resolved, massive problems in the housing market.”
To read the Belvoir Decade of Data report in full, visit www.belvoir.co.uk/pages/rental-index
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