The UK rental market has been a good place to be for landlords in recent times and in August and September once again there was cause for celebration as average buy to let rents broke the £800 a month mark in the UK for the first time. This comes on the back of some pretty negative forecasting during July when estate agent Douglas & Gordon warned: “Landlords are having to adapt to new letting market conditions, with stock levels increasing by a third year-on-year and rental prices dropping slightly in prime central London.“ The rise in rents once again means that tenants are now paying just over £800 a month rent in England and Wales, with London figures at more than £1,270 a month. This represents a 2.1% increase in rents across the UK and a huge 5.8% in London.
For tenants, the outlook is not so rosy as average incomes are by no means keeping up with the pacey rises in rent, going up an average of just 0.2% last year. This leaves many people being increasingly squeezed and significantly reduces the numbers of potential first time buyers who might be in a position to save a deposit to enable them to take the first step on to the property ladder at some point in the near future.
There is also some relatively bad news for those landlords looking for finance to enter into the buy to let market, as recent reports indicate that around half those trying to obtain a buy to let mortgage are unable to do so. The Residential Landlords Association released figures earlier this month stating that around 21% of landlords could not get a buy to let loan, whilst another 25% were finding it increasingly difficult to obtain investment in their property projects. According to the Council of Mortgage Lenders lending was up 5% this quarter on the figures for the three months before, however, this money doesn’t seem to be making its way into the buy to let lending market. RLA chairman Alan Ward, highlighted the lack of finance currently available in this sector, saying: “We welcome the government’s renewed commitment and interest in the opportunities that the private rented sector can play in meeting the country’s housing needs. However, this will not happen without financing from the banks.”
There is obviously a solid link between a dearth of finance for buy to let properties and a smaller number of rental opportunities driving up rents on existing properties, and this is clearly not a tenant’s market. Add to this the large number of new tenants competing in the market as a result of the lack of available and affordable housing to buy, particularly first time buyers, and it’s not hard to see why rents continue to rise. The traditional transition from rented accommodation to a first home is just not being made, partly perhaps due to the enormously high costs of moving to – and purchasing – inflated house prices and an unwillingness on the part of the banks to advance the money. So it seems that for all existing landlords the rental market is a great place to be right now, but for most other parties it’s a pretty challenging environment.