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New data released by insurance firm HomeLet claims that average rents have fallen now for three months on the bounce.
The past month’s decrease of 0.6 per cent follows a previous drop of 0.8 per cent. And over the past month alone in London, rents for the capital have fallen 2.2 per cent - the largest drop since October 2020.
The HomeLet figure analyses archived rents rather than just new lets and the company says that although the current downward trend in rental prices will go some way towards mitigating defaults and taking pressure off the average renter, the wider context is that rental prices are still 7.51 up over the past year and some 18.4 per cent higher than two years ago.
HomeLet believes this is not concurrent with wage increases, leaving many more out of pocket now than they were. This is reinforced by the company’s data on rent-to-income ratio, which suggests the average renter pays 33.5 per cent of their wages on rent; this is up 2.32 per cent over the past year.
Andy Halstead, HomeLet & Let Alliance chief executive, says: “Now is not the time to get carried away with these marginal improvements. On the one hand, it’s great to see rent prices continue to fall month on month, and by the biggest volume in years. But on the other hand, we also know the market and are well aware of the external factors that may impact it in the coming months.
“The Spring Budget approaches, and it will be interesting to see what the Conservative party announces to support landlords and tenants - if anything at all. Recent news suggests the likelihood of policies designed to curry favour with voters ahead of the election later this year. But we believe rebuilding the housing industry after the financial battering it has undergone in recent years should be a major priority.
“Though we can absolutely be positive about the short-term gains we have reported this month, it’s not time to celebrate just yet. By all means, view this month’s figures with optimism, but we need to take it with a massive pinch of salt and hope that the declines remain steady.
“Of course, marginally lower rents put slightly more money in tenants’ pockets and partially reduce the likelihood of defaults, but the broader landscape is still incredibly challenging for all parties - with little sign of easing. In fact, following last year’s trajectory, it is entirely possible that rents could be five to 10 per cent higher by this time next year.
“Unless we see some dramatic changes to the economy, 2024 looks set to bring more of the same. Landlords will have to do battle with a familiar array of struggles, including rising costs and prohibitively expensive buy-to-let mortgage rates. Can the government turn it around? Only time will tell.”
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Only on a spreadsheet, not out there in real life.
Take London rents out of the equation and the results will be different.
So, in a roundabout sort of way, the article is trying to say rents are not going up quite as quickly as before. Rents are not going down in London. They are still going up, at 7.51% over the last year. Mine is up 22% over two years. Of course, a tipping point is being reached, and to be frank, I will be happy for a little sensible stability both in rents and government policy, that is a major driving factor in rental increases.
Rents, through supply and demand, are perhaps most closely aligned to employment/unemployment and wage increases/decreases. If fewer people are employed and wages, relatively speaking, go down, rents will drop and vice versa. It's nothing to do with greedy landlords - they have little say in the rents they charge - it's capitalism and supply & demand working as it is meant to.
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