Falling supply seems likely to squeeze rents higher – RICS

by Property 118

10:20 AM, 8th August 2019
About A year ago

Falling supply seems likely to squeeze rents higher – RICS

Make Text Bigger
Falling supply seems likely to squeeze rents higher – RICS

As the new Government seems to be concentrating on increasing home ownership, falling supply in the lettings market seems likely to squeeze rents higher. As the headline tenant demand indicator (quarterly seasonally adjusted data) picked-up to post the strongest reading since the closing stages of 2016, landlord instructions fell once again, extending a run of continuous decline stretching back over the past thirteen quarters.

Near term rental growth expectations were therefore driven up, with the headline net balance of +25% in July representing the most elevated reading in twelve quarters.

Simon Rubinsohn, Chief Economist, RICS said:

“The lettings market data continues to send a very strong message that institutions need to upscale their build to rent pipeline to address the shortfall resulting from the decline in appetite from buy to let investors. It is significant that the near-term rental expectations indicator has climbed to a three-year high.”

When it comes to the outlook for house prices, near term expectations deteriorated over the month, but at the twelve month horizon, projections remain marginally positive in net balance terms.

Rubinsohn said: “The latest RICS results will provide little comfort for the market with all the key indicators pretty much flatlining. Indeed, the forward looking metrics on prices and sales also seem to losing momentum as concerns, clearly voiced in the anecdotal feedback, both about Brexit and political uncertainty heighten.

“Some support may be provided by an easing in the cost of money which could feed through into lower mortgage finance costs, but this may be insufficient to provide a spur to lift activity given the clouds hanging over the economy.”


Share this article

Twitter Facebook LinkedIn

Comments

David Lawrenson

10:59 AM, 8th August 2019
About A year ago

The article highlights that the much vaunted and oft talked about "build to rent pipeline" seems to be stuck or have a blockage somewhere, leading to rising rents.

Projected numbers banded about by BTR advocates and consultants like Savills, CBRE and of course, ever-present influencer and trade body, the British Property Federation, might look big, but spread across the UK, they are small and a fraction of total existing private rental stock.

Of course, none of those interested in build to rent will be inspired and made any more likely to invest for the long term when the like of Corbyn and Mayor Khan talk about rent controls.

The fact is that one logical outcome of talk of rent controls is to further cut investment in new build to rent stock, especially from pensions funds (with their long term horizons designed to match income with liabilities).

Taken that together with possibly reduced stock as the more fearful landlords sell out, pressure on rents will only increase.

Rent controls really are the second best way to destroy a city, short of bombing it as the famous economist, Assar Lindbeck said.
See more here:
https://www.lettingfocus.com/blogs/2016/05/rent-controls-london/

David Lawrenson
http://www.LettingFocus.com
Independent Advice for Landlords

AJR

23:50 PM, 8th August 2019
About A year ago

Build to Rent is a profit building corporate/institutional enterprise.
Any government willing them into the market will do so at their peril. Once these cartels have control of sufficient housing, up will go the rent to stratospheric levels and we will have a PFI/NHS wrecking scenario all over again, and no gov has proved able to control it since.
Giants are seldom pretty.
Hopefully the sums won’t add up and they will go away and exploit something/someone else.

Monty Bodkin

9:01 AM, 9th August 2019
About A year ago

Build to rent is a niche red herring trotted out by the anti's, politicians and big business as the saviour of the housing crisis.

They use big numbers and bullshit words like 'pipeline' (meaning sometime in the future providing we get plenty of juicy taxpayer subsidies) to confuse the issue.

BTR provided 30,000 homes over 5 years. Compare that to the millions of homes BTL has been responsible for building.

Destroying the PRS with nothing to take its place was a very stupid/callous thing to do.

https://www.savills.co.uk/research_articles/229130/283707-0

We estimate that the 30,000 completed BTR homes have a total value of approximately £9.6 billion, based on average values for standing PRS portfolio transactions. This is just under 1% of the total value of privately rented housing in the UK, at £1.5 trillion. The vast majority of the remaining stock is owned by individual landlords: 1.9 million homes are owned with a buy-to-let mortgage.

NB, the 1% figure is only achieved by some very creative accounting.

David Lawrenson

9:50 AM, 9th August 2019
About A year ago

Build to Rent for the institutions does produce meagre returns, (and much smaller than any decent "buy to let" landlord could achieve), yet I do fear that big build to rent could be given special privileges, to help them, such as exemption from rent controls.

In fact we have already seen a start on "One Rule for the Big Boys Another for the Small Landlord" in Newham's Olympic Park, where the landlords there - all big investors - were exempted from the boroughs all borough licensing scheme, not by council edict but by central government when minister James Brokenshire intervened.

This is more likely under the Conservatives who are naturally close to the institutional investors like Legal & General, some of whom are big donators to party coffers.

More here...
https://www.lettingfocus.com/blogs/2019/01/one-rule-for-overseas-investors-one-rule-for-buy-to-let-landlords/

David Lawrenson
http://www.LettingFocus.com
Unbiased Consultancy Advice for Landlords

Monty Bodkin

10:04 AM, 9th August 2019
About A year ago

Reply to the comment left by David Lawrenson at 09/08/2019 - 09:50
Build to Rent for the institutions does produce meagre returns

Access to £1Bn of taxpayer's cash on very favourable terms must help a bit;

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/559586/Build_to_Rent_Fund_Prospectus_-_archived.pdf


Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

OR

BECOME A MEMBER

Room rents in London remain depressed

The Landlords Union

Become a Member, it's FREE

Our mission is to facilitate the sharing of best practice amongst UK landlords, tenants and letting agents

Learn More