The first three months of 2011 saw an 11.6% increase in the average capital value of rental houses, from £401,400 to £447,900. Previously, this figure had declined following the last market peak at £442,600 in 2007.
This growth in the Private Rented Sector (PRS) was driven by London and the South East, with a 14.8% increase in average capital value in central London and 16.2% in the rest of the South East. The rest of the UK experienced a drop of 5.2%.
According to ARLA, this growth is due to an increase in family homes coming onto the rental market, which generally carry a higher value than smaller homes. ‘We believe that this increase in the overall average capital value of rental properties has been driven by different types of home being offered to let,’ said Ian Potter, operations manager of ARLA.
‘Today's housing climate and uncertainty around jobs and income means many people are choosing to let rather sell their home, causing an increase in the number of family-sized homes available to rent,’ he added.
ARLA's research shows that, of the 39% of ARLA members reporting an increase in property coming onto the market because it could not be sold, the biggest proportion was for family sized homes, with 66% reporting an increase in semi detached properties and 63% reporting an increase in detached houses.
‘While these changes do not necessarily mean individual properties are worth more money, they do indicate that there is increasing flexibility in terms of the types of property available to would be tenants in the PRS,’ explained Potter.
‘The recent expansion of the PRS for those unable to buy reinforces the need for greater institutional investment, which was acknowledged in the Budget through the Chancellor's amends to REITs and Stamp Duty on bulk purchases. The Government must recognise however that these investors see consumer protection as paramount to protecting reputational risk, and so regulation is urgently required if there is to be an influx of landlords into the sector,’ he said.
‘Landlords with a greater valued asset recognise that by using a regulated ARLA member, their money will be protected by a client money protection scheme, a service which many unregulated agents do not offer. ARLA members can also market the property more effectively through PropertyLive.co.uk, the only property portal which uses professional, regulated agents,’ he added.
The ARLA research also showed a slight rise in the average capital value of rental flats, from £258,500 to £267,400, a 3.4% increase. Again, this occurred mainly in central London, up 4.7%, and the South East, up 4.4%, with a 1.7% drop elsewhere in the UK.
It also shows that Lincolnshire and the East Midlands appear to be following the national trend with the calibre of tenant rising along with the type of properties coming to the rental market.
The BBC relocation to Manchester and that of another major PLC to the region has certainly bolstered demand for good quality family sized accommodation in this area and that demand continues to outstrip supply, according to the report.
‘Over the past 12 months, there is no doubt we have let many more properties with a capital value of between £400,000 and £1 million plus, and even a quite a few in the £2 million to £5 million price range, with rents reaching a eye watering £25,000 per calendar month,’ said Philip Chadwick, director of Gascoigne Halman in South Manchester and North Cheshire.
Kent is experiencing a shortage of properties with demand increasing from professional couples unable to secure mortgage finance while Cardiff is experiencing a shortage of high quality family homes coming to the rental market. Demand is increasing for all types of rental properties in Essex.
