UK PRS Rental Prices Fall From Record High

Tuesday, November 25, 2014

UK PRS Rental Prices Fall From Record High

UK PRS Rental Prices Fall From Record High

Separate Indices Report PRS Rental Prices
Reach Record Highs As Well As Falling Rents

There are conflicting reports being circulated by leading property specialists regarding the amount of rent being charged in the UK’s private rented sector (PRS) during October 2014.

According to the latest buy to let index data published by LSL Property Services, owners of the estate agency chains, Reeds Rains and Your Move, rental prices for UK rented properties in the private sector reached a record level last month.

Average PRS rents increased 1.5% year on year in October 2014, reaching an all-time high of £770 (GBP) per month. On a month-by-month basis, rents were up 0.3% on September 2014 figures.

The LSL data also shows that despite the record costs, PRS growth was actually slower compared to the preceding two years, despite the increased use of a range of specialist products and services designed to make property rental easier, such as Rent Protection Insurance.

In the 12 months to October 2013, PRS rents increased by 1.9%, whereas in the period between October 2012 and October 2013, a rent rise of 3.4% was recorded.

Conversely the October HomeLet Rental Index shows that the rental prices PRS landlords are charging on new tenancies are continuing to fall across the UK with rental prices dropping in 7 out of 12 UK regions in October 2014. However, while rental prices for new tenancies in October were still higher than in the same month of 2013, HomeLet recorded falling rental prices in each of the last three months in many UK regions, indicating a cooling in the rental market across the country.Regions that had previously recorded high rental price growth are now recording falling rental prices:

  • Greater London – rents in October 2014 were 3.8% lower than in September 2014
  • East Anglia – Rents down 5.4%
  • South East – Rents down 3.1%
  • South West – Rents down 9.3%

However, it isn’t all doom and gloom for portfolio landlords and property investors, as there are still a couple of UK regions where rental asking prices have actually increased and rent arrears across the UK are falling:

  • North East – Rents up 3.8% in October 2014
  • East Midlands – Rents up 3.4% in October 2014

As of 31st October 2014, just 6.9% of all PRS rent is in arrears, representing a drop of £12 Million (GBP) in the total sum owed to PRS landlords in the UK. This is in part due to the increased use of Rent Protection insurance products by landlords, fewer rent rises and an increase in tenant disposable incomes.

Rent arrears averaged 7.2% in September 2014 and 7.1% in October 2013, and the total amount of rental arrears outstanding now stands at £244 Million (GBP) – down from £256 Million (GBP) owed to landlords in September, just 0.3 percentage points above the all-time rent arrears low of 6.6% recorded in November 2013.

The outlook for UK PRS landlords remains healthy as the UK’s private rental sector is still seeing great demand for rented properties and whilst rent increases may have stalled in some UK regions, property prices have still increased sharply in most parts of the country and there is little sign of an improvement in credit conditions, so the private rental sector looks set to continue benefiting from demand from large numbers of people that find themselves priced out of buying property.

Better affordability of rental property is good for tenants in the long run, and comprehensive tenant referencing allows landlords to utilise Rent Protection Insurance products to provide continued rental income should tenants experience a sudden change in circumstances, allowing landlords to remain in business and pay the bills.

This was written by Mike Clarke. Posted on at 11:30 am. Filed under Insurance. Tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , . Bookmark the permalink. Follow comments here with the RSS feed. Both comments and trackbacks are currently closed.