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Tenant demand for buy-to-let housing is running at the highest level landlords have seen for five years. This is the Guild rent digest for February 2021.
According to a survey from specialist landlord lender Paragon Bank, a third of private landlords say they are dealing with increasing numbers of inquiries. The research also showed growing tenant demand varies across the regions.
Although 58% of landlords in the South West reported more inquiries from renters, only 10% in Central London could report the same. Landlords also confirmed inquiries were up in the West Midlands (48%), Wales (42%) and the South East (42%).
Meanwhile, separate data from the Association of Residential Letting Agents (ARLA) was at odds with the Paragon Bank research. ARLA’s Private Rented Sector Report, December 2020, says tenant demand dropped but contradicted a report from the Royal Institution of Chartered Surveyors (RICS) that suggests tenant demand rose modestly in Q4 2019.
Annual rent increases hovering between 1.4% and 1.5% since November 2019 nudged down to 1.3% in January, according to the Office for National Statistics (ONS). By country, Wales saw the highest year-on-year rent growth - up 1.6%, while in England the figure was 1.3% and in Scotland, rents rose just 1%.
“Growth in private rental prices paid by tenants in the UK has generally slowed since the beginning of 2016, driven mainly by a slowdown in London over the same period,” says the latest ONS Index of Private Housing Rental Prices. “Rental growth started to pick up at the end of 2018, driven by strengthening growth in London. Rental growth has remained broadly flat since November 2019.”
Excluding London, the ONS reports rents in England increased 1.5% - down from 1.6% at the end of last year. London rents were up 0.8% in January, again down on December’s 0.9%. The ONS also revealed that private rents had increased by 10% since January 2015.
The South West and East Midlands had the most significant rent increases in England for January, reporting a 2.2% rise. The West Midlands was next with 1.8% growth, and London (0.8%) and the South East (1%) were the most significant losers.
Average rents for new tenancies in January were £979 a month, a year-on-year increase of 2.7%, according to tenant referencing agency Homelet.
Excluding London, the average rent across the rest of the UK is £839 a month –5.8% more than a year ago. London rents are down 3.9%. This is the eighth month in a row London rents have dropped, although the rate of decline slowed from 4.4% in December. Average rents in London are £1,563 a month.
“The data continues to show that demand remains exceptionally high in many areas. The needs of tenants have shifted throughout the pandemic, creating upward pressure on locations that offer more space, both inside and outside the property,” says Homelet CEO Andy Halstead.
He also warned landlords to be vigilant as fraud and other suspicious activity increased during the COVID-19 pandemic.
“The industry is working more remotely, and things like online viewings will continue to play an essential part in the tenancy process. This remoteness could be contributing to the increase we've seen in fraudulent and suspicious activity; it just highlights how critical high-quality checks are to the lettings process,” he said.
| Region | Jan-21 | Jan-20 | Annual change | Dec-20 | Monthly change |
| South West | £919 | £851 | 8.00% | £924 | -0.50% |
| East Of England | £979 | £907 | 7.90% | £983 | -0.40% |
| South East | £1,094 | £1,021 | 7.10% | £1,085 | 0.80% |
| East Midlands | £698 | £656 | 6.40% | £694 | 0.60% |
| West Midlands | £741 | £699 | 6.00% | £735 | 0.80% |
| Yorkshire & Humberside | £680 | £651 | 4.50% | £682 | -0.30% |
| Wales | £675 | £650 | 3.80% | £679 | -0.60% |
| Scotland | £683 | £666 | 2.60% | £687 | -0.60% |
| North West | £775 | £764 | 1.40% | £772 | 0.40% |
| North East | £540 | £540 | 0.00% | £539 | 0.20% |
| Northern Ireland | £648 | £662 | -2.10% | £651 | -0.50% |
| Greater London | £1,563 | £1,627 | -3.90% | £1,556 | 0.40% |
| UK | £981 | £953 | 2.90% | £979 | 0.20% |
| UK outside Greater London | £839 | £793 | 5.80% | £838 | 0.10% |
Source: Homelet
For landlords confused by the stats and what they mean, here are some answers to the most asked questions about rents.
Check the data carefully. Different indices cover different periods, and the samples vary between reports. The ONS has the most significant sample, so it should return the most reliable figures, but the time taken to collect and analyse the statistics often means the ONS data lags behind the rest of the sector. ARLA derives insights from letting agents and provides what’s known in the trade as a sentiment survey rather than factual data. Homelet statistics are based on customer data, which may not fully reflect the market.
That’s a business decision for landlords. The rent statistics indicate how the market is moving but do not reflect demand from tenants and property standards in local neighbourhoods. Don’t forget the data is historical, so it gives a picture of what’s happened rather than what will happen.
That’s up to individual landlords. For instance, one index with a solid customer base in the same area as a landlord’s portfolio may align more closely with market rents for that neighbourhood. Average data is not much good if you don’t have an average home, and median rents will cover everything from a room in a shared house to a four-bedroom home. Extra research with local letting agents will likely give a better view of where a landlord should pitch a competitive rent and stop them from underselling.
Although several letting agents and property organisations publish regular rent statistics, many have been affected by the coronavirus lockdown that has their reports suspended or delayed.