Rental growth across the country accelerated further in Q2 as demand stayed high and there was only a limited response on the supply side.
The market is characterised by low levels of stock leading and very strong competition for properties. On the policy side, DLUHC published a white paper ahead of next year’s ‘Renters Reform Bill’, aiming to improve fairness and standards in the PRS.
The outlook for the national rental market remains strong, according to the latest RICS Survey results. ‘Tenant Demand’ recorded a +36 net balance in June, and while this is the lowest figure for over a year it is still well into positive territory and was matched by a decline in ‘Landlord Instructions’, to -11 (from +6 in March). Again, this points to further rental growth, and indeed the ‘Rent Expectations’ net balance remained high at +52. Figure 1 shows these metrics along with the ONS rental index, which reached 3% for the first time since the series began in 2012. Note that this index measures all rents paid rather than new lettings so typically underestimates rental value growth among new listings; 3% is a large increase in this context.
Figure 1 – Rental growth vs. RICS rental indicators
Source: RICS Housing Market Survey (Jun 2022), ONS IPHRP (GB). Note: RICS data lagged 3 months
Rightmove’s Q2 Rental Price Tracker reported annual rental growth above 10% both nationally and for all regions. London recorded a 15.8% rise, the highest ever of any region since the index started. The report notes that rents outside London have grown by 19% in the two years since the pandemic started, matching the level of increase seen in the eight years pre-pandemic. Homelet’s June index reported similarly high growth for London with other regions in the 6-11% annual growth range.
A summary of the latest regional rental data is shown in the table below.
Landlord possession claims and actual repossessions continued to increase after being restricted during the pandemic. Over 19,000 claims were issued in Q1, 58% of the 2015-19 average. Repossessions are not recovering at the same rate, rising to 3,800, only 41% of their previous typical level. The historical trends are shown in Figure 2.
Figure 2 – Landlord possessions, quarterly
The long-awaited ‘Renters Reform Bill’ is expected to be introduced by Spring 2023 after the Department for Levelling Up, Housing and Communities (DLUHC) published their white paper, A Fairer Private Rented Sector. The key changes include:
End of Section 21 ‘no fault’ evictions
Rent increases only allowed once per year
Minimum standards extended from social to private rental homes
Landlord register in the form of a new digital ‘property portal’, plus a new ombudsman
No more bans on renting to families with children or those on benefits, plus more rights for tenants to keep pets
DLUHC note accompanying the white paper says it aims to reset the ‘power balance between tenants and landlords’, but as always the devil is in the details and it remains to be seen how many of these proposals make it into law, and how effective they will be if they do.