Friday, August 19, 2022

Residential rent rises in the private rental sector (PRS) tied to RPI

Rents in the private rental sector increase in line with the rate of inflation and retail price index

Residential rent rises in the private rental sector (PRS) have been closely tied to the rate of inflation and retail price index (RPI) in England and Wales over the past five years, according to Allsop’s latest ‘Rent Check’.

The survey (published with BDRC) analysed annual rent rises over five years to March 2018 across regions and property types. Of 54 combined data points, 32 lay below RPI and 22 above. It also suggests that rents have been moderated by affordability levels, weakening tenants’ ability to pay.

Rent levels have also risen by a high number of landlords letting properties at below market rate to keep tenants, with 59% of landlords surveyed claiming they let at least one property at below market levels.

The most important factor in stabilising rent levels has been good PRS supply, which has kept up with the growing demand for rental accommodation. However, changes by the Prudential Regulation Authority (PRA), dwindling tax relief and the proposed three-year minimum tenancies could have a ‘detrimental impact’ on future supply, resulting in a sharp increase in future rents, the firm warned.

The report also found that 85% of landlords surveyed are currently making a profit – the figure has stayed the same since early 2017. Despite the uncertainty surrounding the impact of policy, 41% of landlords rate the outlook for their portfolio as ‘good’ or ‘very good’ for the next quarter.

Partner at Allsop, Paul Winstanley said landlords prepared to accept lower rents for good tenants investing in the supply of buy-to-let property has helped keep rent rises sustainable.

Although most landlords are committed to the sector and are not likely to sell-up and leave anytime soon, government policy is likely to make life difficult for them in the longer-term. This risks the supply of much needed housing, which can’t be met by the build-to-rent sector and homeownership alone.

Research partner at BDRC, Mark Long added that there is a great deal of resilience being demonstrated by private landlords. Current PRS policy conversations around longer mandatory tenancy agreements are causing uncertainty in the market, and it will be interesting to see how landlords and their representative bodies react during the consultancy period on these key proposals.


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