While we have yet to see the monthly rental index report produced by HomeLet for December, the statistics produced for November definitely bear out our views of how the rental market shifted in 2013.
As we were sensing throughout the latter part of the year and now borne out by the statistical trend, both rents and demand in this part of the world have stabilised. This is pretty much the trend throughout the UK, indeed the HomeLet Rental Index data shows that after lowering for a second consecutive month, average UK rents are now at their lowest amount since May 2013. They are still 3.9% higher than the same time last year though and 15.1% more than four years ago.
The introduction of the Help to Buy scheme has reduced the demand for rental properties and led to the stabilisation of rents across the UK.
We believe this is positive for the private rented sector. Rental prices were rising at a very high rate owing to high demand and lack of supply – and consequently making costs increasingly unaffordable. However, with Help to Buy now in place, this demand has relaxed, rents have eased and tenants can look forward to more stable living costs.
The private rented sector offers many different lifestyle choices to a wide range of people. Students rent on a short-term basis while they attend university, couples rent as they save for a deposit for a mortgage and professionals rent when they move to a new area after relocating for a new job. We’re also now seeing more families and retired people (see related article below) moving into rented homes as part of longer-term tenancies.
These are just some examples that reflect the flexibility of living in a rented property – and what makes the private rented sector such an attractive proposition for investor landlords.
The demographic of tenants is changing – we can see from this month’s data the average age of those renting a home across the UK has increased by a year to 34.4 since November 2012. Although rents may be stabilising, momentum must be maintained on making sure tenants are provided with decent homes, secure tenancies and affordable rents. The market can then return to its position of being an accessible, affordable and flexible housing option for the UK’s population.
What does all this mean for 2014? In the short run, despite what we’ve said, we forecast a slightly adverse impact from Help to Buy on landlords. However, once all of the would be First Time Buyers have had their aspirations either met (because they’ve been able to save the deposit and can buy somewhere) or thwarted (because of house price increases and lack of available stock) then the rental market is likely to settle into a stable pattern going into the second half of the year and beyond.