UK residential rental sector recovers from difficult start to 2012, says new index
The rental market in the UK appears to have recovered from what was a difficult start to 2012 according to residential property experts Move with Us.
Their first Rental Index report covering the third quarter of the year using weekly data, tracking more than 150,000 advertised rental properties across England, Wales and Scotland, shows that average rents fell slightly early in the quarter before recovering in September. Prices remain at around £970, a slight decline from the second quarter average. Over the last 12 months, prices have increased by 2%, adding around £20 per month to the average rent.
‘The index confirms a consistent and increasing demand for rented properties across all regions. Many aspiring home owners struggle to qualify for mortgages which is leading to increased demand in the rental sector. These long term renters are demanding higher quality accommodation and look to stay for much longer than we have previously seen,’ said Robin King, director of Move with Us.
Over the past fifteen months, London has seen large fluctuations in rents including a period of price inflation in the lead up to the Olympics. Rental prices are still more than twice the national average but have fallen back to more affordable levels in the third quarter.
The last quarter has seen London rental prices stabilise at around £2,270 after falling from an Olympic induced high of £2,411 in June. They now appear to be recovering from this setback as rents increased by 0.2% in the last two months of the quarter.
Yorkshire and Humber has one of the lowest and most stable average advertised rental rates in Great Britain, so a 7% increase in rents was unexpected. The average rent is now closer to the rest of the North and Midlands, at around £602 per month, compared to £559 at the beginning of the quarter.
‘Yorkshire and Humber is an area to watch, with what seems to be a surge in demand for rented accommodation in an area largely associated with home ownership. This resulted in rents increasing by 7% in the last quarter. Alternatively, rents may just be catching up with those in surrounding areas,’ explained King.
‘Overall, we should expect further rent increases in the fourth quarter with the majority of regions continuing along their current trends. However, these may be short lived as the economic effects of low wage inflation coupled with higher energy and fuel costs start to bite,’ he added.
Rents in the South East are significantly higher than the rest of the UK due to its close proximity to London. The third quarter has seen the average advertised rents peak at £1,120 per month before returning to around £1,110 at the end of the quarter. Average rents remained between these two figures over the quarter without significant fluctuation.
The third quarter began with steady advertised rent increases in the South West, contrasting with much higher growth rates registered in the previous quarter. Rent inflation accelerated from August, averaging 0.5% per month. The total increase in average rents over the quarter stood at £9 or 1.2%. Rents have recovered with sustained growth from May, hitting a peak of £787 and showing no signs of decline in the next quarter.
Landlords across East Anglia have seen a 2% increase in advertised rents in the third, marking a third successive quarter of growth. This is in keeping with the steady growth characterising 2012. Prices recovered by 4% between February and September, following a difficult second half of 2011. There was a small decline in September, leaving rents averaging £871 per month.
Rental price increases in the East Midlands accelerated in the third quarter compared to the previous quarter. This took rents to 3.5% above their July 2011 levels, with monthly rents rising from around £587 to over £600 between July and September. The current trend suggests the average rent will rise further for the remainder of the year.
The West Midlands had an encouraging start to the quarter, with advertised rental prices recovering from an early drop and stabilising at around £655 in late August. Unfortunately, the start of September saw rents drop to £651 after a quarterly high of £659. This region has been fairly stable and robust since the start of the index in July 2011. The next quarter may see further decline, but the average rent is likely to remain at around £650 in the long term.
With one of the lowest and most stable average advertised rental rates in Great Britain, a 7% increase in Yorkshire and Humber advertised rental prices was unexpected. The average rent is now closer to the rest of the North and Midlands, at around £602 per month, compared to £559 at the beginning of the quarter.
The North East appears to be on the up, recovering from the 4.5% decline in advertised rents that took hold in the first half of 2012. The current average rent is £16 lower than the year’s highest point, with the current average at £651. There has been an overall increase of around 0.5% since the same period in 2011 and a 2% increase from the start of the index.
The North West is experiencing slight increases in average advertised rents, after recovering from a large fall in rental prices at the end of 2011. This quarter has seen a return to rental price growth after a 0.5% drop in the latter part of the last quarter. There was a 2% increase between July and mid-September, though rents did decline in the last two weeks of the period. The current average advertised rent stands at around £620 per month at the end of September, marking a £17 increase from the previous year.
The average advertised rents in Wales behaved in a very similar way to the rest of the UK in the last quarter, with sharp increases after a 6% decline in the first half of 2012. Wales had the second largest rise in rental price of any region in the third quarter with a 5.6% increase from £604 to £640 over a three month period. Rental price levels remained at this level to the end of the quarter, suggesting that this is sustainable.
Advertised rental price levels in Scotland have remained below the July 2011 rate for the final part of 2011 and much of 2012. This quarter has been no exception, with a fall of around 1% after an initial increase of 1.3%.
Signs of a recovery in August were dashed by a further 0.25% decrease, leaving rents at close to 2% lower than those experienced in July 2011 levels and 1% lower than the same period last year. Average rental prices in Scotland, at £657, are £337 below the British average. King said that the current trend suggests a further decline over the coming quarter, though there is the possibility of a slight recovery in the fourth quarter from a higher base than in 2011.