Rents set to rise quicker than house prices in the coming years

By Will Leyland, 14 February 2017

House prices and rent increases are always the subject of intense scrutiny in the UK, with an obsession with home ownership often baffling observers across Europe and the West, where renting and ownership are viewed with a much more relaxed philosophy.

The so-called ‘housing crisis’ facing the UK was highlighted once again last week with Sajid Javid, the Secretary of State for Communities and Local Government, publishing a white paper claiming that the property market in Britain is ‘broken’, and announcing plans to build more affordable housing.

The focus on housing across the country has led the government to take action, and it cannot be disputed that demand is far outstripping supply. This has led to year after year of price and rental increases with no end in sight.

With this in mind, The Royal Institution of Chartered Surveyors (RICS) has predicted that rents will increase by just over 25% in the coming years – a greater rate than the predicted 20% growth in property values. In the months leading up to January, tenant demand rose sharply and further skewed the supply and demand figures. The natural conclusion to this imbalance would be a sharp rise in the cost of renting.

Landlords who intent to keep and in some cases increase their portfolio should see rental yields rise over the next five years. Those who hold properties in areas where capital appreciation isn’t particularly high should welcome this news, as yields signal positive increases in profit.

The RICS survey was researched before the announcement of Javid’s housing white paper which offered encouragement for developers to build large-scale rental flats for tenants and more long-term “family friendly” tenancies. Some campaign groups criticised the fact that these were limited to new purpose-built private rented homes, and said renters on stagnant wages needed homes costing no more than one-third of their income.

One initiative that seems to have affected renters tangibly is the focus on the regulation of letting agents. With some charging fees way in excess of reasonable expectation, and offering little to no customer service in return, there are growing concerns that renters were being taken advantage of, to the detriment of the industry’s reputation.

With the prominence of bodies such as the Association of Residential Letting Agents (ARLA) in helping with regulation, customer satisfaction has risen sharply with a majority now reporting that they are satisfied with the level of service provided. Landlords are reporting that the stress of running a large portfolio has now been reduced, whilst tenants are reporting that the ability to reach a central point of communication for issues such as maintenance and renewals has eased the burden.

A good relationship between the landlord, the tenant and the letting agent is vital, and here at Intus Lettings we prioritise the needs of our landlords and tenants at every opportunity. Maintaining a positive relationship with both tenants and landlords is at the forefront of what we do - for more details about the personalised service Intus Lettings can provide, please click here.

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