A slowdown in the sales market during the last six months of 2014 saw a demand for rental accommodation grow, with 7% more would-be tenants registering during the second half of the year than they did during the traditionally busier first half. Movement of households between the sale and rental markets has had an impact on shaping growing demand in the second half of the year. 14% of households that moved in England last year, moved between the owner occupation and the private rental sector, broadly in equal numbers.
The increase in demand from tenants for rental properties is reflected in the growth in average rents. For newly let properties, the rate of annual growth ran at an average of 3.7% during the first six months of 2014, rising to 4.2% during the final six months. It was a similar story for sitting tenants for whom rents increased from 1.7% to 1.8% over the same period. 26% of tenants who chose to renew their contract at the end of 2014 saw their rent rise 2.9% over the year.
Seasonal changes in the rental market
Alongside the relationship with the sales market, the nature of the lettings market means it is highly seasonal. Much activity is concentrated within a few key times of the year. In city centre markets, the summer months tend to see particularly high levels of activity, the time when students seek property for the forthcoming year. In the heavily dominated student markets of Birmingham, Bath, Cambridge, Oxford and Liverpool, over a third of lets are made during just two months in the summer. For many investor landlords, this represents the best time to market their property to let.
Outside of the city centre, where three times the proportion of homes are let to families with children, activity in the rental market is closely correlated to school terms. Given the longer timescales involved, properties have to be secured well in advance of the September term. April, May and June represent the three months when 35% of lets are made in the year. Conversely, half terms and the first few weeks of September see activity levels decrease, with the number of registering tenants, viewings and agreed lets all running at two thirds of the average over the year.
Nick Dunning, Group Commercial Director, Countrywide plc, said: “The sales and rental sector are closely linked with thousands of households moving between the two tenures every year. In the second half of 2014, we saw a decrease in the number of tenants actively looking to buy. This has kept demand for rental accommodation at a high, allowing more landlords to stand firm in the face of attempted negotiation on rent.
For investor landlords, understanding when the best time to let a property is key to reducing void periods and securing the highest rent. Landlords looking to rent a flat to students in November will find it considerably more difficult than if they were letting it in July. Conversely, tenants who have a degree of flexibility are potentially able to bag themselves a bargain by looking to rent outside of the busiest times.”
