Rents Becoming Unaffordable

Thursday, December 6, 2012

Landlords Urged To Be More Realistic With Rental Asking Prices

UK PRS Rent Becoming Unaffordable

UK PRS Rent Becoming Unaffordable

With tenant demand for private rented sector (PRS) property easing due to the countdown to Christmas and New Year, it has come to light that many landlords have set rental asking prices that are beyond the affordability of many tenants.

London-based property consultants have advised landlords to be realistic when setting levels of rent and report that tenant affordability and an oversupply of properties are contributing to an ongoing correction in PRS rental prices in the capital.

Property consultant and estate agent, Cluttons, say that landlords who wish to let their properties need to be flexible on rent and should consider a reduction of 15-20% off current asking prices to avoid having a void property over the festive season.

Price-conscious tenants are also negotiating hard on new tenancy agreements or at renewal using the greater choice of rental properties as a bargaining tool to get better value for money, effectively driving prices down.

Lynn Hilton, partner for residential lettings at Cluttons, said: “Affordability is now central to the performance of Londons rental market. Landlords cannot achieve the asking prices they were getting twelve months ago and must now be far more realistic with rent reductions of around 15-20% in order to secure a let. Despite a small turn around in rents during the third quarter, our evidence shows that prices have begun retreating once more, highlighting the need for landlords to be realistic in their approach and expectations. Sensible landlords need to accept these reductions to minimise void periods. Greater choice across Central London is no doubt adding to tenants bargaining power.”

Landlords should be looking to receive a regular income from their buy to let properties every month not trying to make large amounts but getting enough to cover running and maintenance costs with a little profit as a bonus. Being realistic with rental asking prices makes more sense than asking more than the tenants can reasonably afford. Landlords can even get Rent Guarantee Insurance to ensure a regular income. With tenant demand hitting unprecedented levels earlier in the year, it is far healthier for the rental market to offer quality properties that are within the financial reach of the tenants.

This was written by Mike Clarke. Posted on at 9:00 am. Filed under Insurance, Landlord News. Tagged , , , , , , , , , , , , , , , , , , , , , , , . Bookmark the permalink. Follow comments here with the RSS feed. Both comments and trackbacks are currently closed.

One Comment

  1. It true that housing rent have increased faster than inflation (as measured by Retail Price Index) over the last 25 years, as illustrated by the historic chart of UK housing rents against the RPI inflation measure.

    What everyone seems to have forgotten is that is that rents are governed by wages, house prices by the availability of credit and its price (interest rate). If rents go up too far people just default on their payments and landlords get a higher percentage of their tenants in rent arrears (ie loss money) as written about on this website Tenant Evictions Increase – More PRS tenants are struggling with rent arrears.

    Over the long term rents are strongly correlated with salaries increases, as revealed by this chart showing that UK housing rents have increases in line with salaries over the past 25 years

    So is the real question is how long can housing rents continue to increase faster than wages and increasing rent arrears cause buy-to-let’s landlords default ton their mortgages and cause the banks to fire sail the reposes flats/houses (as the Government does not force debt forbearance on commercial mortgages? Now that would cause house prices to fall.

    Monday, December 24, 2012 at 4:11 pm | Permalink