However, Belvoir's Chief Operating Officer, Dorian Gonsalves warns that the situation could soon become very different if the government fails to reverse its policy for mortgage relief taxation, and introduce measures that will increase the nation's supply of rental properties.
Dorian Gonsalves, Belvoir COO, commented on the findings: “This is Belvoir's first post-Brexit rental index and the results, together with a survey of our franchise owners, confirm that the market that Belvoir is involved in, which consists of good quality rental accommodation, is currently quite stable,” says .
Rents in Q3 increased slightly, but did not go up as much as in 2015. Rents for studio flats were more static in Q3 compared to Q2. In general, house rents fared much better than flats, with four and five bed detached houses increasing by approximately £25-£50 compared to Q2. When we looked at tenant demand, 88% of offices reported an increase in demand for houses and 63.5% of offices reported an increase in demand for flats, although they are expecting tenant demand to increase for flats in Q4.
When we looked at expectations of rental increases or decreases during the next quarter, nobody is expecting a massive change in the run up to Christmas. Historically Q2 and Q3 tend to show an increase and Q4 tends to be when there might be a decrease, as landlords don't want properties to be left vacant at this time of year and so it is an opportunity for tenants to pick up a bargain.
Two to three bedroom houses remain top of the list for stock shortages, with 81% of offices reporting a shortage of three-bed semi-terraced houses, 68% reporting a shortage of three-bed detached homes and 66.5% of offices reporting a shortage of two-bed houses.
There is an over supply of flats in some areas, which is why it is really important for investors speak to a reputable letting agent, such as Belvoir, before they commit to investing in any rental property. Investor enquiries were actually strong in Q3 and in some areas the number of enquiries had increased. This is interesting as it shows that despite Brexit and stamp duty increases, landlords have not yet been frightened away from investing.
Our analysis of rental periods in Q3 vs Q2, showed that almost half of franchise owners (46.3%) reported that the average time for tenants to rent was 13-18 months, and over a quarter (27.78%) reported the average time in a rental property was over two years.
The majority (42.59%) of franchise owners reported that the average void period for properties in Q3 was up to two weeks. This clearly demonstrates that tenants who want the security of a longer tenancy should make sure they go to a reputable agent, because they are the ones that will ask the right questions, and take care to place tenants in the right accommodation, whilst ensuring that landlords are happy to have longer tenancies in their properties.
Much of Belvoir's data is helping to dispel the myth that the only people who are renting are those who cannot afford to buy. Because of the last government's shift in policy away from home ownership and the lack of houses being built, there is now an urgent need for more housing for students, migrants, labourers who are moving to new areas for jobs, and professionals with families who require four to five bedroom accommodation and view renting as a better option.
2015 and 2016 are the first years since the recession where wages have been increasing faster than inflation; a situation that is likely to continue until the end of the year. However, there is no doubt that Brexit will result in an increase in inflation next year and when this happens, as it did during the recession, it will hit people's pockets.
When people are not experiencing wage growth and have less cash in their pockets, landlords in some areas are going to find themselves in a difficult position as they will be incurring tax increases, but will struggle to increase rents to cover this because we know that rental increases can only be in line with wages. This is something that we hope the Government will listen to, and take steps to address.
If there is no reversal in government policy with regards to mortgage relief taxation, and no measures are introduced to increase the supply of rental properties then landlords are likely to come under increasing pressure to raise rents. If they subsequently start selling off properties, this will clearly have a negative effect on the availability of good quality accommodation. We await the Chancellor's Autumn Statement on 23rd November with great interest.”
