PRS predictions for 2015 – part one: rents

What is the outlook for the UK rented sector in 2015? Following is a round-up of predictions from those in the sector, focusing on the likely direction of travel for rents.

The central London market, which operates in its own bubble due to a range of international influences, could see strong market growth. Some agents – but not all – are predicting strong rises. Marsh & Parsons predicts 10% growth in central London rents, while Knight Frank pencils in a more modest 3.5%.

Peter Rollings of M&P commented: “The rental market will be where much of the action takes place in 2015. 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.”

In contrast, Benham & Reeves predict that rents will stay flat in the central area, with those in outer zones rising, as renters migrate to more affordable areas that remain in easy commuting distance to central London.

At Jackson-Stops & Staff, the glass is certainly half full, according to chairman Nick Leeming. “For investors, the long-term outlook is bright for buy-to-let, particularly in and around city locations with good transport links. The demand from Generation Rent will continue to grow for high quality homes.”

Outside London and the south east, Knight Frank expects rents to average a 2.2% rise. And Sue Foxley, head of research at Cluttons, expects rents to rise across the country between  3 and 5%. Chestertons, meanwhile, expect a relatively flat performance from private sector rents across the UK.

In the wider UK housing market, the expectation is there will be lots of hot air and promises – and little activity – due to the general election. Members of the National Association of Estate Agents think demand will continue to advance modestly ahead of supply. Polled recently, 34% saw the base rate rise having the biggest effect on the housing market in 2015, while 32% put stamp duty changes top, and 32% believed the election will be the largest influencing factor.

“The General Election will be a pivotal event for the housing market next year, with all three main parties pledging to build more homes should they be elected. We have already seen the current government put policies in place in an attempt to tackle the problem, with the announcement of new garden city developments, as well as the reforms to stamp duty” said Mark Hayward, NAEA managing director .

“These changes are still not enough. The lack of capacity within the current market means that the gap between supply and demand probably won’t close for some time – we currently don’t have the resources to respond to the problem, and this is another issue that needs addressing.”

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