Rental prices are expected to increase by around 2-3% during 2015 across the UK, underpinned by a continuing shortfall of supply against demand. Yet in central London, that rise could be as high as 10%, local agents in the capital reckon.
The countrywide prediction has been pencilled in by David Cox, managing director of the Association of Residential Letting Agents: “Simply put, we need more houses. Demand continues to outstrip supply.” He notes there will be some supply increase, with investors moving their focus from London and the south east towards the north of the country. Some “accidental landlords” – those who were forced to rent when homes they had bought slipped into negative equity – will be finally in positive territory, allowing them to sell.
In London, while the heat is coming out of residential sales, agent Marsh & Parsons believes it will instead be applied to rentals. “The rental market will be where much of the action takes place in 2015,” said the company’s chief executive Peter Rollings. “Those relocating to the capital for work are now biding their time before purchasing their own portion of London property, until question marks surrounding additional property taxes are erased.”
“This will push demand in the corporate lettings sector even further, and the biggest rental increases are predicted to be among one or two bedroom flats. Supply of rental properties looks set to be sustained, but any regulatory changes to tenancy fees under a new government could inflate rents artificially. The powers that be need to ensure that landlords are not spooked out of the market by unnecessary layers of legislation, and that aspiring property investors don’t take their money elsewhere.”
ARLA is also keeping a close eye on regulation in the sector. Cox said the outcome of 2015 general election could impact the private rented sector substantially. “The colour of the next Government will have a large impact on the rental market; particularly when it comes to regulation of the sector. ARLA would like to see a fully regulated industry to build a better, stronger private rented sector, which will help to eradicate the rogue agents who tarnish our industry. Labour is pro regulation but has also pledged to introduce three-year tenancy agreements with strict rules which will make it more difficult to evict tenants. This could see landlords pull out of the market.”
Cox sees some impacts from existing leglslative changes that still have to work through the market. “The recent Immigration Act requirements on landlords, which are being trialled in the West Midlands, may be rolled out more widely in 2015. Under the new Act, letting agents will be required to make ID checks to establish the immigration status of all prospective adult occupiers before a residential tenancy agreement is granted. Whilst establishing ID checks for all adult occupiers is effectively converting best practice to law, it may push some vulnerable tenants into the arms of rogue operators.”