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Is the Rental Property Market Set to Change?

Letting Fees and Market Statistics

Is the Rental Property Market Set to Change?

The government’s housing white paper published in February gave a welcome boost to the rental property sector. Local planning authorities will be expected to include provision for units specifically designed for the rental market in their local plans.

The last two decades have seen a rapid expansion of the private rental sector and it’s now estimated to be worth £1.4 trillion. Much of this growth stems from the rise of the buy-to-let landlord, a move that began in 1996. Demand for rented accommodation is likely to remain strong in the face of high property prices, lack of properties for sale, falling real incomes and rising inflation. All these factors affect the ability of aspiring homeowners to save a sufficient deposit to allow them to set foot on the housing ladder.

However, there is also growing evidence that, like our European counterparts and those living in major cities around the world, more people in the UK are choosing to rent. They value the flexibility to move when it suits them, they have less financial responsibility and don’t have to maintain the property.

 Letting fees

Following the government’s pledge to ban lettings agents’ fees to tenants, agents will no doubt hope to shift the costs to the landlords, which in turn could push up rents. Rents were already likely to rise, as many landlords hit by the new buy-to-let tax regime and stamp duty changes will look to recoup their lost profits from their tenants. Fewer buy-to-let landlords are likely to enter the market, which could mean more properties are bought by ordinary home buyers, reducing the availability of property to rent.

What happens in the economy naturally has a bearing on what tenants can afford to pay, and landlords will need to be mindful of a tenant’s ability to pay higher prices. Across the UK, rent accounted for an average of 28% of a tenant’s household income before tax; in London it was 31%.

Market statistics

HomeLet, the lettings reference agency, recently carried out a tenant survey which showed that 46.7% of tenants were currently saving to buy their own home, the largest household type was couples with no children, 72% were happy with their landlord, and 75% were reasonably happy with the response they got to maintenance requests.