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Rents rise by 2.5% in 2018

The latest rents index from HomeLet Rental Index showed steady growth in UK rents last year, up by an average of 2.5 per cent year-to-date, with the average UK rent now at £932 per calendar month.

Despite the uncertainty surrounding Brexit and the tax squeeze on private landlords, rental values are expected to hold-up again in 2019, underpinned by an expected reduction in supply due to disposals.

London is showing a healthy 3.7 per cent increase over 2018 with rents across the capital now averaging £1588 per calendar month, and in prime central these figures were 9.7 per cent and £2356 respectively. Outside of the capital, £775 is the average rent recorded, which has increased by 2 per cent over the same period.

The Key Points Average rents across the UK rose by 2.5% in January 2019 when compared to the same month a year previously; the average monthly rent is now £932 Rents in London increased by 3.7% in January 2019 than in the same month of 2018; the average rent in the capital now stands at £1,588 a month. When London is excluded, the average UK rental value was £775 in January 2019, this is up 2.0% on last year. HomeLet’s January Rental Index reveals that rents rose in 11 out of the 12 regions covered in the research. In January, average rental values in London (£1,588) were 70.4% higher than the UK (£932) When London is excluded the average rent in the UK was £775 in January, average rents in London (£1,588) were 104.9% higher than the rest of the UK. Martin Totty, chief executive at HomeLet, commenting on the latest index data said:

“Positively for both tenants and landlords, this year we’ve seen stability in UK rental price growth, with increases remaining broadly in line with the rate of consumer inflation. For landlords there remains a sustained demand for property, with the private rental sector continuing to provide the market with both flexible and long term housing options.

“The slowdown in the rate of house price growth, as reported by the Nationwide House Price Index is being driven by the depressed London market, which saw house prices decline by 0.8% during the last four months of 2018.

“In contrast, we have seen average rental values in the capital rise by over 4% in the latter stages of the year. Ultimately, we would expect this theme to continue in London, if the demand for property outweighs supply.”


House prices down in the South but up in the North

Asking prices will stay flat next year, Rightmove is forecasting.

It believes that the “current sound fundamentals of the housing market” will continue, but that any increase in political or economic uncertainty would have a detrimental effects. Rightmove says asking prices in the north could rise by 2% to 4%, but that prices in the London commuter belt could drop by 2%. Asking prices across London will still fall, but by 1%, rather than the current annual rate of decrease of 2.4%. Rightmove director Miles Shipside managed to deliver the forecast without mentioning Brexit, although he did refer to uncertainty.

He said: “Since the property market’s recovery from the 2008 financial crisis, many parts of the northern half of the UK have seen marginal or relatively modest price increases. “We predict that these areas will continue to see price rises, though tempered by affordability constraints. In contrast, regions in and around the influence of London saw prices go up in a five-year period by an average of around 40%. “Consequently, we forecast that these previously booming areas will continue to see modest downward price re-adjustments in 2019. “Agents in some locations are reporting that home movers are being negatively influenced by the ongoing political uncertainty, and a more certain outlook would obviously assist market sentiment. “Whilst uncertainty traditionally deters some discretionary movers, particularly at the high end of the market, there are many would-be buyers and sellers who will be getting on with their lives and will be keeping the market moving.”


Rents predicted to rise over next 5 years

International property consultants Savills says affordability, not Brexit, will be the major factor in the future for the UK housing market.
Latest residential property market forecast shows predictions for the UK mainstream property market 2019-23:

• UK house prices to rise 14.8% from 2019-2023, with significant regional variation Ranging from 21.6% in the North West to single digit growth in London (4.5%), SE and East (9.3%)
• London’s prime market will perform more strongly, with prime central London +12.4%
• Transactions to stabilise, with first time buyer and cash buyer numbers most resilient
• Rents to rise 13.7% over next 5 years; London rents +15.9%
• UK house prices are set to rise broadly in line with incomes over the next five years, that’s the forecast from Savills latest study released 2nd November 2018.

The traditional north-south divide will turn on its head, says the report, with the Midlands, North and Scotland expected to see the strongest increases, according to this new forecast from the international real estate adviser, Savills.
Brexit will continue to have an impact on sentiment over the short term, particularly in London and its commuter belt, but local market affordability is expected to be more of a determinant of the pattern of price growth over the longer term, says the high-end agent.
Savills predicts that between 2019 and 2023, UK house prices will rise an average 14.8 per cent, ranging from 21.6 per cent in the North West to single digit growth in London and the South, by far the strongest performers since the downturn, due to affordability constraints. Values in the capital’s prime market will perform much more strongly, given price adjustments already seen in those market since 2014, thinks Savills.
Other regions were much slower to recovery post the 2008 recession and the global financial crisis (GFC), and some have only recently returned to peak values. House prices are therefore more affordable, with greater capacity for loan to income ratios to increase.
Lucian Cook, Savills head of residential research, has said:
Savills says that “transactions, rather than house prices, are often seen as the ultimate measure of market strength. Sales volumes have fallen only -6.9 per cent since the Brexit vote to 1.145 million, demonstrating the resilience of the UK housing market.”
The firm expects that this figure will decrease by another 1.0 per cent over the next five years. “But a continued re-balancing of the composition of the market is expected, with mortgaged buy to let investor purchases falling by -23 per cent. This will add to upwards pressure on rents,particularly in London, as investors look to lower value, higher yielding markets.”

Latest on High Street Letting and Selling Agents' Fees

High street agents’ fees vary from city to city, from a low of around 0.8% to a high of 1.7%, while online firms have risen hugely in the last two years. According to estate agents comparison website, high street agents in Leicester and Glasgow have the lowest average fees, while London has the highest average fees. The table below shows the lowest and highest percentage fees, and what that on average works out to, based on Land Registry prices as at the second quarter of this year.

Highest traditional estate agent fees in the UK 1) London 1.70% (£10,877) 2) Sunderland 1.33% (£1,885) 3) Manchester 1.31% (£2,5,95) 4) Birmingham 1.25% (£2,568) 5) Leeds 1.18% (£2,444)

Lowest traditional estate agent fees in the UK 1) Glasgow and Leicester 0.84% (£1,042) and (£1,577) 2) Edinburgh 0.89% (£2,127) 3) Hull 0.91% (£1,086) 4) Bradford 0.94% (£1,555) 5) Liverpool and Bristol – 0.95% (£1,424) and (£2,852)

These statstics also reveal that, overall, traditional estate agent fees have fallen across the UK property landscape since 2016. Leicester saw the biggest reduction in fees going from 1.41% in 2016 to 0.89% in 2018, a drop of over 40%. However, an exception is specialist agents selling properties in high-value areas like N1 in London contributing to a hike of 45% (from 1.5% in 2016 to 2.18% in 2018) CEO Alex Thorpe, said: “It’s no surprise that, over the last few years, traditional agents have increasingly brought fees down to compete with online and hybrid agents. “However, we have seen that high street agents have continued to evolve their service to justify the extra fees with more focus on service along with an emphasis on helping to manage the entire process from marketing to completion. “We provide a level playing field for both traditional and online agents, so sellers can find the best option for them.” The same research also shows online estate agents fees have increased 37% over the last two years.

Letting Agents may face legal action over 'No Benefits Tenants' ruling

Agents and landlords who state in their adverts that they will turn away housing benefits tenants could face legal action from one of the major lobbying groups.

It's understood that Shelter could be considering a class action on the grounds of discrimination. The listed estate and letting agency group said yesterday evening that it had become aware that Shelter had targeted one of its offices, posing as a prospective tenant on benefits. After being told by Shelter that it was breaking discrimination law, the group had taken legal advice. Counsel’s opinion was that a breach of discrimination law looks likely. The agent said it had also been advised by its legal team that landlords might have a defence that is not open to agents – that lenders and insurers do not allow letting to tenants on benefits.

Some of the above stories are taken from Property Industry Eye, a leading online news resource for estate and letting agents.

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