News

Another great year for the Private Rented Sector

By Will Leyland, 25 November 2016

As 2016 approaches its conclusion and business begins the process of wrapping up for Christmas, we can start to look what to expect in the final weeks in rental property.

It has been a year of highs for the Private Rented Sector (PRS) which has performed admirably considering the up and down political climate. It’s fair to argue that while currencies, commodities, stocks and shares and commercial property have seen wild swings, the residential property market has lead the way.

The first post-Brexit rental index from Belvoir has confirmed that, despite uncertainty following Brexit and recent stamp duty increases, the rental market continues to thrive.

Rents in Q3 increased slightly, though not at the same rate as in 2015. Rents for studio flats were more static in Q3 compared to Q2. In general, house rents fared much better than flats, with four and five bed detached houses increasing by approximately £25-£50 compared to Q2.

There is little expectation of any further major changes to rental rates in the run up to Christmas as, historically, Q2 and Q3 tend to show an increase and Q4 tends to see a slight decrease, as landlords do not want their properties to be left vacant at this time of year.

Two and three bedroom houses remain top of the list for stock shortages, with 81% of offices reporting a shortage of three-bed semi-terraced houses, 68% reporting a shortage of three-bed detached homes and 66.5% of letting agents reporting a shortage of two-bed houses.

Further to this, the latest data from Rightmove has revealed that there has been no respite for those attempting to get their first foot on the property ladder as the number of available properties with two beds or fewer has only risen by 1.7% this month.

Although the price of property coming to market has recorded a resilient seasonal fall of 1.1% in November, smaller than the average 1.8% over the previous six years, the annual rate of growth for smaller properties is up nearly £15,000 – equivalent to a rise of 8.2%.

Research shows the two groups most pessimistic about their housing situation both contain potential first-time buyers. Those living with parents and renters aged 21 to 24 ranked highest in negative sentiment, leading to increasing calls for more help for first-time from the Government. Ideas that have been mooted include releasing suitable public land at below market value to speed up construction, relaxing planning regulations, and offering tax breaks to further incentivise landowners to sell up.

But while first time buyers may be struggling, landlords continue to reap the benefits of a steadily decreasing supply of affordable homes available for sale. As the supply shrinks, the value of existing property portfolios increase and rental yields continue to climb.

As the year approaches its end and the property market continues to perform strongly we can reasonably predict 2017 to continue very much where 2016 left off.

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