Property experts say rents to rise by 15% in the next five years

Rents to rise by 15% in the next five years, according to property experts

House and moneyRents are going up, but landlord fees are also going up. Meanwhile, letting agents are losing out on tenant fees. So who's winning in all this?

A market snapshot produced by RICS (Royal Institution of Chartered Surveyors) predicts rents are set to surge amidst increasing demand for private housing and a decreasing supply.

RICS predicts rents in England will rise by 2% in the next 12 months and by no less than 15% by 2023, with Wales following a similar trend.

Good news for landlords you may think, but with agents set to increase their charges once they're banned from charging tenant fees next year, the extra rent won't all be extra profit.

Why is there a decreasing supply of properties available to rent?

The current Government wishes to level the field on which the property market is played out and put first-time buyers in a better position to get on the housing ladder. They feel first-time buyers are being outmuscled by buy-to-let investors, so their solution (unofficially) is to hit landlords from every angle possible.

Additional stamp duty on second homes and tax relief cuts on buy-to-let mortgage interest payments have been the most publicised moves from Theresa May's cabinet, meaning it's now far more expensive to both buy and run buy-to-let properties than it was previously. This has seen many small-scale landlords sell up, with their properties being picked up by residential buyers.

Allowing another generation an opportunity to get their first foot on the ladder shouldn't be frowned upon, of course, but there's no doubt it's had a negative knock-on effect for both landlords AND those who can't afford to buy just yet. Why? Well, if it's true landlords are offloading 3,800 buy-to-let properties a month, it means a sizeable reduction in the number of houses and flats available to rent; generating more prospective tenant interest for properties that are on the market. And, when demand for anything is high, prices are ramped up. In this case, it's the rents that go up.

All this at a time when home ownership in the UK has fallen more than any country in the EU since the financial crisis.

Will the ban on tenant fees change anything?

On the face of it, the impending ban on agents charging tenant fees is positive news for those who are renting, but it will inevitably drive rents up in the short-to-medium term. Agents will seek to recover their vast losses from landlords by asking that they pay more for their services, leading to landlords wanting more rent from their tenants in order to sustain profit. So what was initially seen as a positive for tenants may not be such good news in the future.

Tenant fee bans are widely expected to be introduced in England and Wales during 2019. Both bills are going through parliament and, although the English bill was submitted first, it may well be Wales who introduce the ban first due to a speedier parliamentary process.

28 September 2018


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