Last month, we saw some of the first real rental data for 2020 - Homelet’s Rental Index showed average rents were up by 2.3% and by 4.4% in London, compared to January 2019. Average rent (excluding London) was £793pcm and £1,627pcm in the capital. With the Consumer Prices Index running at 1.8%, the rises were considerably above inflation, especially in London, in the areas like Marylebone, Hyde Park, Regent’s Park and Mayfair. In all, they were up in 9 out of the 12 regions surveyed. The biggest rise occurred in the North East (8.7%), followed by Wales (7.3%) and the East Midlands (5.1%). The biggest fall was in the South West (-0.9%).
Despite a raft of upcoming tax and legislative changes, including; the ending of lettings relief (April), a further reduction in mortgage interest relief (April) and mandatory electrical testing (July), specialist mortgage lender Paragon found landlords’ confidence was surprisingly high when they were asked about their prospects for 2020. That confidence was not so much based on yields, as rising rents and property values. 25% are expecting rents to rise, against 1% expecting them to fall and 32% are expecting property prices to rise, against 14% expecting them to fall.
However, with the onset of the lockdown, everything has changed and the rental market has gone into stasis, although, in their latest quarterly report, Zoopla found the average rent for a property in the UK in the final quarter of 2019 was £886pcm. An annual increase of 2.6% - the highest growth rate in three years. Now, people are only moving if they have to. In addition, to help tenants struggling with their rental payments, the government has allowed them to take a three month rental holiday. To compensate, landlords will be able take a three month mortgage holiday. Both are only deferring the eventual costs, which must be added to future payments, but for added protection, there is a three month ban on tenant evictions.
Renting is a popular option during uncertain times and there is still a chronic shortage of stock, which should ensure demand (and rents) continue to grow when we are finally able to go back to normality.