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Rents Fall for a Second Month?

Saturday, January 21, 2012 Posted in: Other

According to this morning’s buy-to-let index from LSL Property Services, rents in the UK are falling for the second month in succession. This may just be seasonal adjustment, and one wonders about the validity of such snapshot navel gazing. The broader pattern is that rents continue to rise in the South East and in London in particular. (5% and 5.6% respectively).

Rental demand in Oxford remains strong; and we have noticed rental increases in all parts of town. Some hotspots have had increase over 10% but on the whole student properties have risen 4% partly mindful of the predicted downturn in demand the year after next, and professional and family properties have gone up in line with the South East norms.

The next year or two will be interesting; local authority interference in the property market both through additional licensing and through restrictions on the movement from C3 usage to C4 together with changes in the Housing benefit rules could create a perfect storm in the HMO market. Any drop off in student demand for HMOs is likely to be more than compensated for by increase in demand through social housing sector, and next year when high numbers of both will be straining the sector, we must assume that there will be little or no planning permission granted, and we could see rents reach unprecedented levels. From April this year, single people under the age of 35 who apply for housing benefit, will not be able to live in independent accommodation. Housing benefit will only be payable if the applicant ins in shared accommodation.

This picture is not dis-similar to that reported by David Whittaker managing director of Mortgages for business, who has commented on in the country as a whole. He said: “The seasonal lull in demand impacted average rents towards the end of 2011, but demand will be robust over the first few months of 2012 which will help strengthen prices. However, the problem we may face later this year is rental affordability.

“Overall, rents have been on the rise for the last two years, and there will come a point when average rents are simply too high for many people to afford. We then face the danger of rising rental arrears and a surge in demand for affordable rental property – demand that current stock levels cannot satisfy."

“This is why it is vital that lenders and the Government support property investors and landlords and make it easier for them to invest in multi-unit freehold blocks and Houses of Multiple Occupation. These are the property types that will help ease the rental sector’s burden and avoid a situation where people are unable to buy but also cannot afford to rent – the consequences of which would be very dire indeed.”

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