Guild of Landlords Rent Digest – May 2021

According to official data from the Office for National Statistics (ONS), Rents increases are continuing to plateau. Here we had our rent digest in May 2021. 

Rents had nudged up and down by just 0.1% since January 2020, when the 12-month increase was 1.5%. In April, the latest month for data, the annual change was 1.2%, a 0.1% fall from the figure for March. Rents in Wales are rising the fastest – up 1.6% in the past year, compared to 1.2% in England and 1.1% in Scotland. 

Rents excluding London grew by 1.8% year on year, while tenants are paying just 0.1% more in the capital. UK average rents had increased by 10.3% since January 2015, when the ONS started to record data.

Rents by region in England

Rents are growing the fastest in the South West and East Midlands, where landlords have increased prices by 2.3% – a slight fall from March. Rents are climbing the lowest in London, where rents were up 0.1%, followed by the South East and East of England, both at 1.3%, says the March ONS Private Housing Rental Price Index. 

The ONS also points out that the Association of Residential Letting Agents (ARLA) and Royal Institution of Chartered Surveyors (RICS) report the number of tenants seeking a new home rose for the third month in a row while the number of properties available to rent is falling.

Tax and legal changes trigger a surge in rents

Rents are set to rocket in the summer because the government fails to understand how the private rental market works, claims a leading property expert. Andy Halstead, chief executive at tenant referencing firm Homelet blames rising rents on the cost of dealing with ever-changing tax and legal changes rather than a greedy push for profits by landlords. And he warns tenants are likely to pay more as COVID-19 restrictions relax. 

The average rent paid by tenants across the UK is £996 a month – up 2.9% from May last year, and London rents are down 5.3% from May last year from £1,668 a month to £1,580.

“We’re fast approaching a summer where rental prices could accelerate at a rate never seen before,” he said. “Almost a quarter of adults in the UK live in the private rented sector. The sector’s importance seems to be understated by those who don’t understand how vital it is. 

“The common misconception is that increases in rents are solely driven by unscrupulous landlords trying to maximise profits. That is simply not true." 

“Landlords have been hit by a sustained raft of legislative changes, which mean that their costs to let property have had to increase. With the Tenant Fees Act as an example, costs are ultimately passed on to tenants through higher rents - the same group who should have benefited most from that legislation. 

“The ban on all tenant evictions and plans to abolish Sections 21s may prompt some landlords to consider exiting the market, causing yet more strain on property supply. Letting property will continue to be an excellent long term investment, but the pandemic has amplified some of the issues that both landlords and tenants are facing. 

“Once the furlough scheme ends, millions of people could potentially face unemployment at the same time as tackling the most expensive rental market on record. The country risks a deepening crisis if policy changes aimed at restoring balance to the market are not urgently pursued.”

Homelet – Average rents by region

Source: Homelet

Guild of Landlords Rent Digest – FAQ

For landlords confused by the stats and what they mean, here are some answers to the most asked questions about rents.

Why do the rent indices show different results?

Check the data carefully. Different indices cover different periods, and the samples vary between reports. The ONS has the most significant sample, so should return the most reliable figures, but the time taken to collect and analyse the statistics often means the ONS data lags the rest of the sector. ARLA derives insights from letting agents and provides what’s known in the trade as a sentiment survey rather than solid data. Homelet statistics are based on customer data, which may not fully reflect the market.

Should landlords raise rents in line with the stats?

That’s a business decision for landlords. The rent statistics are an indication of how the market is moving but do not reflect demand from tenants and property standards in local neighbourhoods. Don’t forget the data is historical, so it gives a picture of what’s happened rather than what will happen.

Which rent index is the best?

That’s up to individual landlords. One index with a solid customer base in the same area as a landlord’s portfolio may align more closely with market rents for that neighbourhood, for instance. Average data is not much good if you don’t have an average home and median rents will cover everything from a room in a shared house to a four-bedroom home. Extra research with local letting agents is likely to give a better view of where a landlord should pitch a competitive rent and stop them from underselling.

How has coronavirus disrupted the statistics?

Although several letting agents and property organisations publish regular rent statistics, many have been affected by the coronavirus lockdown that has their reports suspended or delayed.