The results of Belvoir’s Q4 rental index, and a survey of landlord trends, confirm that significantly less stock is coming on to the market, putting further pressure on the PRS. From a tenant’s perspective, the good news is that tenancy lengths are naturally increasing, and arrears and evictions are extremely low.
“Although we are not seeing a big landlord sell off yet, our franchisee survey confirms that over 85% of offices are reporting that landlords are selling some properties,” says Belvoir CEO Dorian Gonsalves.
“The largest number of properties being sold remains up to three per branch. Overall in 2017, a higher proportion of offices (15% in Q2 and Q4) saw six to ten properties sold – a higher percentage than seen in the previous year.
“For some time Belvoir has been warning that government steps to reduce BTL stock will not help tenants in the future, as it simply means that they have will nowhere to live. Although we are still seeing landlords buying properties, the numbers are reduced.
“The big question is; how much of influence is the government’s pressure on landlords having? In reality, although we are seeing slightly less demand from tenants than in the past, there is a lot less stock coming on to the market.
Although we are not seeing any evidence of a big landlord sell-off, it must be taken into account that landlords have only just completed their tax returns, and this will be the first time since mortgage relief rates were partially reduced. This being the case, we are not expecting to see anything definitive until Q3 of this year.
“During Q4 rents remained fairly static,” continues Dorian. “This is due to the fact that that inflation and wages have caught up with each other, which typically means tenants don’t have the spare cash in their back pockets to support higher rents. In London we even saw rents dropping slightly. For all Belvoir offices who have traded consistently since 2008 there is a 2% increase year on year, and when compared to the 2016 annual average, the rental increase is 3.25%.
“We looked at English regional rental performances and found that the lowest rents in Q4 were in the North West at £597 compared to £630 in the North East. Highest rents were unsurprisingly in the South East at £1046 and London rents averaged £1431. However, when looking at rental data we can see that, with the exception of London and the South East, rents have been relatively stable since 2008.
“Inflation on flats remained fairly static in Q4 versus Q3, and any rises tended to be quite small – up to £25 a month, if at all. Inflation on houses was slightly up this quarter versus last, especially on larger properties.
“In the main, most Belvoir franchisees are now predicting a rise in flats and house rents, whereas in the past predictions were that rents were to remain static. However, rents for rooms, student and housing benefit tenants are expected to stay relatively stable.
“Our index reveals that demand is static to falling and there continues to be a shortage of three bed semi/terrace properties, followed by two beds, although shortages have fallen compared to Q3 2017. Tenant choice remains better for one and two bed flats and franchisees are predicting that tenant demand is likely to remain the same for different lets and the main demand versus supply pressure will continue to be on houses.
“Tenants are continuing to stay in their properties longer, with over half (52%)preferring a tenancy of 13-18 months, and almost a quarter (23%) opting to stay for 19-24 months. Despite the time of year, tenant arrears and evictions fell back in Q4, with nearly 90% of Belvoir offices carrying no or just one eviction in Q4 2017 – a fantastic achievement which proves that when a tenant works with a self-regulating agent there are hardly ever any evictions because the referencing process works so well. It also shows that even when tenants have the option for longer tenancies they are not taking it up, but choosing to move on and questions the necessity for mandatory longer tenancies.
“This quarter we asked franchisees for their views regarding proposed Government legislation on the safety of rental homes, and whether they thought tenants would be likely to take landlords to court, or simply move when their agreement ended. In the main, less than 10% of Belvoir franchisees thought that less than 10% of tenants would take any action and students would be the most likely to do so. However, it should be pointed out that due to the high standard of Belvoir stock, most properties would not come under this scrutiny as they are let legally and safely.”
To find your nearest Belvoir office and to read the Belvoir Q4 rental index in full, please visit www.belvoir.co.uk