A number of landlords subsidise good tenants by renting at below market rates

Added on August 9th, 2018 in Property News

Rent increases during the last five years have been less than initially perceived, tracking the retail price index (RPI) in England and Wales, with many landlords even prepared to subsidise good tenants by renting at below market rates, according to a new Allsop report.

Allsop’s latest issue of the Rent Check, a barometer for the rental market in England and Wales published with BDRC, analysed annual rent rises in the five years to March 2018 across different regions and property types, and found that of 54 combined data points, 32 lay below RPI and 22 above, revealing annual rent increases were closely tied to the rate of inflation.

The report suggests that rent rises have been relatively moderate due to affordability levels, which have been affected by the rising cost of living and stagnant wage growth over the last decade.

The study also found that rent levels have also been tempered by a high number of landlords letting properties at below market rate to keep tenants.

Some 59% of landlords surveyed declared they are letting at least one property at below local market levels.

Paul Winstanley, partner at Allsop, said: “Shattering the myth of rent rises greatly outstripping inflation, research has revealed rents have in fact risen moderately at a rate close to RPI over the last five years.

“Landlords have also been prepared to accept lower rents for good tenants. This, and past commitment by landlords to invest in the supply of buy to let property, have helped keep rent rises sustainable.”

An additional fact in stabilising rent levels has been good PRS supply, which has kept up with the growing demand for rental accommodation. However, that could be about to change.

The report says that a policy cocktail of PRA changes, including the phasing out of mortgage interest tax relief and newly proposed three-year minimum tenancies, could have an adverse impact on future supply and result in a significant rise in future rents.

Winstanley added: “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.”

The ‘Landlords Panel’ research programme feeds a range of statistics to the Rent Check report, which shows that 85% of landlords surveyed are currently making a profit, a figure that has not changed since early 2017.

“Despite the uncertainty surrounding the impact of policy, a substantial number of landlords will remain in the sector and are unlikely to leave any time soon, with 41% of landlords rating the outlook for their portfolio as good or very good for the next quarter,” said Mark Long, research partner at BDRC.

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