Work from home and HS2 both impact rental costs outside London – NAPB
“Work from home and HS2 have made living outside of London more desirable which has had a knock on effect on rent…expect rates to carry on going one way – up.”
THE cost of renting a home in London is now FOUR times more expensive than some parts of northern England, new research shows.
Renters now face having to fork up to £1,757 per month to secure the keys for a pad in Greater London.
But in the North East average rents are hovering around £503 a month.
The National Association of Property Buyers, who collated the figures, say it underlines once again how the UK is suffering from a “chronic housing shortage”.
Spokesman Jonathan Rolande, also the co-director of House Buy Fast, said: “The pandemic has seen a surge in house prices – but it has also created a goldmine for landlords too.
“Rent rates in many areas have sky-rocketed and although London has predictably seen the steepest climbs the Midlands and the north west have also recorded really marked increases.
“Work from home and HS2 have made living outside of London more desirable which has had a knock on effect on rent.
“Also I think many people aged 18-30 have simply given up on the idea of ever owning a home and are instead spending a bit more money on a beautiful rental property rather than putting a bit of cash away for a deposit.
“There’s little sign the trend is going to change – so expect rents to carry on going one way; up.”
PRESS RELEASE: What Does the Income Squeeze Mean for Renters and Landlords?
- Annual growth in regular pay dropped by 1% in the 3 months to January (ONS)
- Demand increases for Housing Hand’s rental guarantor service as landlords seek ‘quality tenants’
- Income squeeze pushing PBSA and BtR providers closer together
Food, energy, fuel… whichever way they look, UK families are facing rising prices right now, leading EY to project that real incomes will fall this year, as inflation looks set to rise to 8.5% in April.
House prices continue to climb as well, with hometrack’s UK House Price Index for February 2022 observing an 8.1% rise. Nor is it just those looking to buy who are feeling the pain. According to UK rental guarantor service Housing Hand, the cost-of-living increase and income squeeze are also impacting both renters and landlords.
Professionals who rent their homes, for example, will come under more pressure because of the lagging behind of salary increases. Office for National Statistics figures show that annual growth in regular pay, excluding bonuses, dropped by 1% in the three months to January 2022.
“Renting is becoming less affordable, just as many other aspects of life in the UK are, due to the income squeeze. At the same time, landlords will be looking to recoup the impact of inflation and rising prices by potentially pushing up rents. As a result, there will be more people failing referencing as the hunt for quality tenants really accelerates.”Graham Hayward, Chief Operating Officer, Housing Hand
According to Housing Hand, landlords outside of the cities are in a better position for their HMO properties, as some tenants are still opting for the move out for a better quality of life.
However, landlords are looking to recover the increasing costs of living and unfortunately this falls upon their tenants, with rising rents and increasing eligibility criteria to ensure that landlords are not at risk of defaulting tenants. The need for a “quality tenant” is at the forefront of landlords’ minds – someone who has passed referencing or who can bring a qualifying guarantor when renting.
Economically, the pressure is on for professionals, with more companies adopting a hybrid model of working and mandating flexi-worker policies. There has been a shift of encouraging professionals back into the cities, but many are facing the obstacles of higher rent and higher costs of living.
In the Purpose Built Student Accommodation (PBSA) sector, meanwhile, the focus is all about occupancy. PBSA providers have suffered through years of variable occupancy rates due to COVID and the changing student demographics resulting from Brexit. Now, many are looking at interactive models to get the right tenants in. They’ve engaged with an early rental cycle and are pushing for completing on the early rush of students, providing them with good rates in order to secure occupancy for the upcoming academic year.
Unlike professional renters, students’ eligibility to rent is not driven by salary, thanks to student finance, grants/bursaries and family support. In many ways, this means they are in a better renting position right now, particularly as PBSA providers are courting them to bump up their occupancy rates. But that’s not the only plan for many PBSA schemes, according to Housing Hand.
“PBSA providers are considering a more adaptable model. For example, more traditional PBSAs are extending into Build to Rent (BtR), to evolve their current models beyond students and embrace serving lifetime renters. They have similar properties that they can adapt to be more professional for the working population, also the BtR can adapt to earlier cycle student accommodation. Currently the BtR sector is attracting a lot of investment…Some PBSA providers are also changing their risk profiles, from a pay upfront model to a pay-as-you-go model.”Graham Hayward, Chief Operating Officer, Housing Hand
BtR and PBSA are not mutually exclusive. PBSA providers can move into the BtR market and vice versa. There is a lot of fluidity in the market. Housing Hand believes there will be an interesting merging and/or collusion of these two markets over the coming years.
It’s a race to the top between these two markets (PBSA and BtR), however the implications are that the HMO landlords get squeezed when a PBSA/BtR provider moves into the area, as they are challenged to compete with the co-living model. This has occurred already in major cities and university cities where big PBSA and BtR players have purchased land and built or converted their co-living spaces.
The result is that the outlook for renters is strong for students, but for professionals there are challenges with eligibility and with landlords being fussier when renting their properties due to the reducing number of “quality tenants”. Housing Hand has seen an upturn in demand for its rental guarantor services as a result of this and the firm expects demand to increase further, so is increasing capacity as the pressures of the rising cost of living deepen.
Andrew Stanton is the founder of Proptech-PR, a consultancy for Founders of Proptechs looking to grow and exit, using his influence from decades of industry experience. Separately he is a consultant to some of the biggest names in global real estate, advising on sales and acquisitions, market positioning, and operations. He is also the founder of Proptech-X Proptech & Property News, where his insights, connections and detailed analysis and commentary on proptech and real estate are second to none.