The latest Rental Index from PropTech supplier Goodlord has recorded a rent rise and a reduction in void lengths over the past month, with the average rent seven per cent higher than at the same time in 2023.
Average rents rose by one per cent during February, taking the average cost per property to £1,162 in England, up from £1,154 in January.
Rents have steadily been increasing following the traditional Christmas dip, despite rent rises between January and February being far from the norm; rents have dipped in February during four out of the last six years, according to Index figures.
The new average figure of £1,162 means tenants are paying seven per cent more rent compared to February 2023.
Looking at the year-on-year data for February 2024 vs. February 2023, the biggest increase in rents has been seen in the South West, where year-on-year prices have risen by 11 per cent. This is followed by the North East, which has seen a 7.5 per cent rise.
The smallest year-on-year change was in the West Midlands, where tenants are paying 4.5 per cent more.
The biggest regional rise in rents during February came in the South West and the South East, where rents rose by 2.5 per cent. The average price of rental property in the South East is now £1,293, with the South West not far behind at £1,173.
Two regions saw a drop in prices during February - the West Midlands dipped by 2.0 per cent and Greater London by 1.0 per cent.
Further highlighting the ongoing demand for rental properties across England, void periods - the average length of time a property is vacant between tenancies - also shortened during February. Average voids shortened from 22 days on average across England to 18 days - a reduction of 18 per cent.
The biggest change to voids was recorded in the North East, where voids shortened from 24 days in January to just 17 days in February.
All regions recorded shorter voids, with the exception of the South West, which saw void periods hold steady at 20 days month-on-month.
William Reeve, chief executive at Goodlord, comments: “We don’t normally see a bump in rents during February. It’s typically a slower month where things cool off following the post-Christmas release of demand we see in January. The fact that we’re seeing a rise this month is indicative of the ongoing squeeze on the market and a lack of available stock - something that’s further evidenced by the shortening of voids across England.
“Right now, the market is delivering fairly consistent year-on-year stats when it comes to rent rises and we continue to hover around the seven per cent mark. All eyes will be on whether this starts to reduce as we come into the summer following last year’s record breaking numbers, or if new records will be set.”
Diverse views have emerged from financial services figures in response to last week’s news that the headline rate of inflation remained at 4.0 per cent.
According to the latest figures from the Office for National Statistics, prices for food and non-alcoholic beverages fell on a monthly basis by 0.4 per cent, marking the first decrease since September 2021. Cheaper bread and cereals helped reduce food inflation. The rate of core inflation also remained static, at 5.1 per cent.
This has prompted some industry figures to suggest a rate cut will be sooner rather than later.
Ben Thompson, deputy CEO at Mortgage Advice Bureau, says: “Inflation remaining the same will be music to the ears of rate setters at the Bank of England. January’s headline rate had been expected to rise slightly, so this will be seen as good news. Swap rates have been unsettled over the last week, but this reading will fuel more talk of interest rate cuts.
“Inflation is unlikely to fall in a straight line, and as we’ve already seen, there will be ups and downs. However, 2024 is looking to be a more positive year for mortgages. We’ve seen weekly customer volumes close to those of June and July 2023, and with a drop in interest rates potentially coming into view, the outlook is bright for those looking to refinance or get onto the property ladder.”
And an analysis from independent market broker John Charcol says: Mortgage fixed rates hinge on Swaps, which heavily depend on market outlook and sentiment. This [4.0 per cent] announcement is an improvement on market expectations, given recent days have witnessed an upturn in short-term money. Overall, bank rate is anticipated to decrease sooner than initially projected last year now being priced in for June, with no further increases on the horizon.”
However, some believe the Bank of England will be unmoved by the better-than-expected inflation news.
Sarah Coles, head of personal finance at Hargreaves Lansdow, says: “Inflation is expected to dip significantly lower in the months to come, towards the Bank of England’s target in the Spring, when lower wholesale gas prices feed into the figures. That’s not the end of it though, unfortunately, because after hitting the [2.0 per cent] target it’s expected to bounce back, and take a while to drop back again. As a result, the Bank of England has already said it’s not going to cut in a hurry. A surfeit of caution means they won’t cut until lower inflation has bedded in, and we’re a fair way from that.”
And Nicholas Hyett - investment manager at Wealth Club - adds: "The run of disinflationary data points from before Christmas has continued to falter. However, while the disinflationary disco might have stalled - the UK economy has at least avoided a return to rising inflation that many feared. Unfortunately that leaves rate setters and investors with more questions than answers.
“With inflation still double target a run of steadily falling interest rates, which set stock markets dancing before Christmas, now looks less likely. But a lack of cuts could feed through to higher interest rates in the mortgage market, which had already started to price some cuts in. From the Bank of England's perspective that would have a similar effect to a new series of rate rises (something it's likely to want to avoid given the delicate state of the economy). Increasingly there are no good options for Central Bankers."
The trade body representing short lets providers and support companies has reacted angrily to government proposals for a radical shake up.
Housing Secretary Michael Gove has this morning proposed that planning permission will be required for future short-term lets; that there will be a mandatory national register; and that existing homeowners can continue to let out their own main or sole home for only 90 nights a year - any more and they will require planning consent.
The rules apply only to the short lets sector involving homeowners and small-scale landlords - not traditional bed and breakfasts or hotels, for example.
Andy Fenner, chief executive of the trade group the Short Term Accommodation Association, says: “We’ve been calling for a registration scheme for years, so it’s disappointing that when it finally arrives it completely fails to address the challenges the country is facing.
“The registration scheme could have been game changing for tourism in England had it covered all types of accommodation but, instead, what we’ve got is a missed opportunity that’s a half-way house at best. Had it been that comprehensive, politicians up and down the country would have been able to make well-informed decisions on planning.
“They’d have been able to see exactly how the tourist industry functioned in their local area, which is important because a one-size-fits-all approach that achieves the right balance in one place would crush the tourism in another.
“Instead, the holiday let industry is doomed to continue being unfairly regarded as tourism's problem child, second-best to hotels, and unjustly taking the brunt of the blame game surrounding housing supply and affordability, despite the lack of a proper evidence base. The presumption is that, if you shut down all short term rentals tomorrow, the housing crisis would be solved but that is naive in the extreme.
“The holiday let industry is not responsible for the housing crisis. Its causes run far deeper than that and are centred mainly on a lack of housebuilding and the abandoning of housing targets.
“Short term lets are the modern, dynamic face of the tourism industry and we can’t force people into B&Bs and hotels through legislation. If we did, UK tourism would suffer as people voted with their feet and went elsewhere. The world has moved on, and many tourists don’t want to settle for that any more.
"Restrictions in the number of short term rentals need to be measured against other important factors, such as employment, housing supply, housing need, and changes in the stock of other tourist accommodation. We will continue to call for a comprehensive registration scheme that includes all types of accommodation.
“Without this, the new powers councils are winning, which will allow them to rein in holiday lets using an effective veto on permitted development rights, will be prone to misuse and political posturing rather than a desire to do what is in the best interests of local communities.”
A new report suggests that past impressions of Build To Rent and other institution-funded rental units as expensive and concentrating on securing professional tenants may be wrong.
Residential fund manager Hearthstone Investments - which currently has £450m of assets under management - has published a report basedon data collected from its portfolio of 1,800 rental homes, a mix of houses and flats in low-rise apartment blocks.
It claims the rental homes provide accommodation for residents on average UK incomes. Residents have a broad range of occupations: nurses, police officers, warehouse operatives, software engineers and chefs. In 2023, 27 per cent of residents were key workers.
The report also shows that 55 per cent of residents had moved 10 miles or fewer when they moved into a rental home in the portfolio which the fund claims is “evidence of how the new homes are meeting specific local needs.”
An assessment of local infrastructure around the properties covered in the report shows that 83 per cent of homes are located within 500 metres of public transport and 81 per cent of homes within 250 metres of public green space.
It also says 45 per cent of its developments were transformative regeneration projects of brownfield sites” while “the ongoing management of rental homes creates permanent local employment for agents as well as contractors.”
Cedric Bucher, chief executive at Hearthstone Investments, comments: “There is a desire to better understand what impact these investments have on the economy and communities where they are focused. Our latest report helps us to paint a picture for investors of what is being delivered and for whom, demonstrating value above and beyond capital returns.”
He continues: “The site selection strategy deliberately focuses on areas not only where the supply/demand imbalance will secure long-term, stable returns for investors, but also where there is good quality social infrastructure – services, green space, access to public transport – all factors which contribute positively to residents’ wellbeing.
“There is also a great opportunity to drive employment both in the short and longer term with local people involved in the construction and ongoing maintenance of the homes.
