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Rental prices in UK up by 2.6% in last 12 months
Private rental prices paid by tenants in the UK rose by 2.6% in the 12 months to January 2016, up from 2.5% in the year to December 2015, the latest index shows. The data from the Office of National Statistics (ONS) reveals that rental prices grew by 2.7% in England, 0.3% in Wales and 0.8% in Scotland with rents up the most in London at 3.9%. It means that overall rents are up 0.1% in annual terms compared with the year to December 2015, and up 0.7% compared with the annual price increase in January 2015. The regional breakdown of the figures shows that annual rental price growth varies, rising in Yorkshire and The Humber from 0.8% to 1.2%, and in the North East from 0.6% to 0.9%, whereas it fell in Wales from 0.7% to 0.3%. Rental growth in Scotland has gradually slowed to 0.8% in the year to January 2016, from a high of 2.1% in the year to June 2015. Rental prices in England show three distinct periods, increasing from January 2005 until February 2009, then decreasing from July 2009 to February 2010, and increasing again from May 2010 onwards. When London is excluded, England shows a similar pattern but with slower rental price increases from around the end of 2010. Since the beginning of 2012, English rental prices have shown annual increases ranging between 1.4% and 3% year on year, with January 2016 rental prices being 2.7% higher than January 2015 rental prices. Excluding London, England showed an increase of 2% for the same period. A shortage of suitable properties combined with strong demand, both from people priced out of the housing market and those who prefer to rent, lies behind these increases, according to Steve Bolton, founder of Platinum Property Partners. He believes that the Government is taking an enormous gamble on the private rental sector through its announced changes to buy to let investment and this could affect prices and growth. ‘Ending tax relief for landlords and levying a higher rate of stamp duty will ultimately increase investor’s costs, forcing many to push tenants’ rents up to remain profitable. Standards may also be reduced, with landlords having fewer funds to invest in the quality of their property. In some instances, landlords will be forced to sell, adding additional strain to private rented sector housing stock,’ he explained. ‘It is hard to see how the proposed changes will benefit prospective first time buyers. The biggest barrier to homeownership is a lack of adequate property supply, and discouraging buy to let investment will do nothing to alleviate this. With prices standing at such high levels, first time buyers need to raise a substantial deposit and as rental prices continue to grow this will become ever more difficult,’ he added. Jonathan Hopper, managing director of the buying agents Garrington Property Finders, believes that the traditional January uptick in activity and a scramble by second home and buy… Continue reading
Supply of homes to rent falls in UK as demand rises
The supply of rental accommodation in the UK is the lowest since records began a year ago, while demand for accommodation rose slightly in January 2015, the latest data shows. After a period of gentle decline, the number of properties registered per letting agent branch dropped by 5% to 172 in January, some 10 fewer than in December, according to the report from the Association of Residential Letting Agents (ARLA). A breakdown of the figures shows that supply in Scotland stands above the national average, with 280 properties available per member branch, while the supply of rental properties in London is 59% with only 116 properties per branch. However, London has seen a slight increase in the number of properties available over the last month, rising from 108 in December 2015. Demand for rental accommodation picked up in January following a seasonal lull in December, with an average of 31 prospective tenants now registered per branch. However, it has not returned to the high levels reported in January and February last year, when there were 38 and 40 tenants registered per branch respectively. In line with growing demand, the number of agents reporting rent increases for tenants increased in January, with 30% reporting an increase in rent, the highest since September 2015. ‘Supply of housing continues to be a problem and tenants bear the brunt of this with more people competing for properties at higher prices. The majority of tenants find that it is impossible to save very much at the end of the month to put towards buying their own home,’ said David Cox, ARLA managing director. He pointed out that ARLA’s recent Cost of Renting report found that a fifth of those renting in the UK do not expect to ever be able to afford to buy a home, and unless we act soon to build more properties, this number will only get higher. The report also reveals that 63% of ARLA members think the Chancellor’s stamp duty reforms for buy to let properties will push landlords out of the market, which will in turn cause supply to drop further and 58% believe the reforms will push up rent costs. However, 47% of ARLA agents reported that they have seen an uplift in interest from buyers looking to invest in buy to let properties before the 01 April, a rise from 24% from last month. ‘A few weeks into the new year and the April deadline for the stamp duty surcharge is looming and interest from buyers looking to invest in buy to let properties and beat the deadline is ramping up,’ said Cox. ‘The final details of the new tax will be revealed at the Budget in March but we are not expecting to see the Government back down on this policy. The findings from our members echo our concerns that efforts to penalise… Continue reading
Urban development land outperforms greenfield in the UK
Urban development land values across the UK have continued to increase more than those for greenfield land, according to the latest research. Urban land values increased by 1.5% in the fourth quarter of 2015, up from 0.2% in the third quarter, taking annual growth to 7.1% while greenfield land values increased by 0.7%, up from a fall of 0.1% in the previous quarter and year on year by 2%. The latest residential development report from real estate firm Savills says that the increase in urban land values reflects a rise in demand due to an improved economy, stronger markets and increased viability. Additionally, the report says that urban values have greater scope to increase than greenfield values because they are further below their 2007 peak, an average of 42% below peak compared to 21% below peak for greenfield land. In general, development land values are linked to the supply of land and the demand from developers. The largely stable values of development land are in part due to the increase in supply of new permissions with the annualised number of planning permissions in Great Britain up by 21% in between 2010 and 2015. And it adds that a lack of new players in the market and 46% fewer house builders registered with NHBC in 2015 compared to 2005 has reduced competition for sites. Savills agents report that there is increasing demand for land in urban locations close to good transport links on which, more commonly, apartments are built such as Birmingham and Coventry in the Midlands. This is reflected in the shift in the type of new homes built. Between 2008 and 2014 houses accounted for an increasing proportion of new build homes, however, since March 2014 this trend has been reversed and we are seeing flats accounting for higher proportions of delivery at 35% in the year to March 2015 up from 29% the previous year according to data from the Department of Communities and Local Government. The report explains that the change in type of home being built reflects the improving viability and ability to finance denser sites. Immediately following the economic downturn, housebuilders focused more on developing houses because they require less upfront capital, can be built one at a time and sold as they are finished. However, now that market strength is picking up, there is greater appetite to take on the risk required to build a block of apartments where, apart from off-plan sales, flats are sold only when the whole block is complete. But not everywhere is seeing growth. For example, sentiment for development land in Aberdeen has become less positive and has impacted negatively on the overall Scottish greenfield development land index which was down 0.5% in the final quarter of 2015. Indeed, land values in Aberdeen have fallen 2.9% in the year to quarter four of 2015 for greenfield land and this is due to the continued low oil price and uncertainty over the future of the… Continue reading
