Rising Rents in the UK Due to Landlords Exiting Market

Landlords quitting buy-to-let are impacting the number of homes available to let and pushing rents up.

Half of letting agents say the number of former homes to rent is rising and that when they sell, they are lost to the rental market because 90 per cent are going to buyers to live in as their main home.

The data from survey firm Esurv argues that rising mortgage interest rates and increasing sector regulation are the main worries for investors as they push up costs and reduce profits.

Some 79 per cent of surveyors noted a drop in the number of landlords buying new investment properties, with many landlords intending to reduce their portfolios or exit the market altogether during the next 12 months.

Separate data from the Office for National Statistics (ONS) for the year until the end of August shows rents shot up another 5.5 per cent. The most significant rise was 5.9 per cent in London -  the highest increase for the capital since records started in January 2006.

Rent changes in the London rental sector impact around a third of the UK’s 4.2 million buy-to-let homes. The North East and South West posted the lowest increase of 4.8 per cent.

How rents are changing where you are

Another batch of data from tenant referencing firm Homelet claims UK average rents have soared by 10.3 per cent in the 12 months to August. The firm says tenants moving into a newly rented home pay £1,261 monthly.

Diving deeper into the figures reveals the average rent in London is £2,145 monthly - a 12.9 per cent annual increase. The cheapest rent is £655 a month in the North East.

Homelet CEO Andy Halstead said: “Every region is reporting increased rents. The concern is tenants cannot pay their bills and rent on time, which is not good for landlords.  Sky-rocketing prices across rentals and mortgages need to slow down soon, as no one benefits.”

Buy-to-let rents FAQ

Why do rent indices show different results?

Check the data carefully. The various indices cover different periods, and the demographics of the samples vary between reports.

The Office for National Statistics (ONS) has the most extensive sample, so it should return the most reliable figures. However, the time to collect and analyse the statistics often means the ONS data lags a month behind the rest of the sector.

The Association of Residential Letting Agents (ARLA) derives insights from letting agents and provides a sentiment survey rather than measurable data.

Homelet statistics come from customer data, which may only partially reflect the market.

Should landlords raise rents in line with the stats?

Fixing rents is a business decision for landlords. Rent statistics indicate how the market moves but do not reflect demand from tenants and property standards in local neighbourhoods.

Remember that the data is historical, showing what's happened rather than what will happen.

Why do the rent indices show different results?

Check the data carefully. Other indices cover different periods, and the samples vary between reports.

The ONS has the most extensive sample, so the most reliable figures should return, but the time to collect and analyse the statistics often means the ONS data lags behind the rest of the sector.

ARLA derives insights from letting agents and provides what's known in the trade as a sentiment survey based on what they think rather than data.

Homelet statistics come from customer data, which may only partially reflect the market.

Should landlords raise rents in line with the stats?

That's a business decision for landlords. Rent statistics indicate how the market moves but do not reflect demand from tenants and property standards in local neighbourhoods.

Remember that the data is historical, showing what's happened rather than what will happen.

Which rent index is the best?

That's up to individual landlords. For instance, 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.

Average data is only good if you 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 will likely indicate better where a landlord should pitch a competitive rent and stop them from under or over-selling.