The beginning of 2011 saw an influx of higher value property into the Private Rented Sector (PRS), according to the latest research from the Association of Residential Letting Agents (ARLA).
Research for Q1 2011 shows an 11.6% increase in the average capital value of rental houses, from £401,400 to £447,900. Previously, this figure had declined following the last market peak at £442,600 in 2007.
This growth was driven by London and the South East, with a 14.8 per cent increase in average capital value in central London and 16.2 per cent in the rest of the South East. The rest of the UK experienced a drop (5.2%). According to ARLA, this growth is due to an increase in family homes coming onto the rental market, which generally carry a higher value than smaller homes.
Ian Potter, operations manager of ARLA, said: “We believe that this increase in the overall average capital value of rental properties has been driven by different types of home being offered to let. Today’s housing climate and uncertainty around jobs and income means many people are choosing to let rather sell their home, causing an increase in the number of family-sized homes available to rent.”
ARLA’s research shows that, of the 39 per cent of ARLA members reporting an increase in property coming onto the market because it could not be sold, the biggest proportion was for family-sized homes, with 66 per cent reporting an increase in semi-detached and 63 per cent reporting an increase in detached houses.
Mr Potter added: “While these changes do not necessarily mean individual properties are worth more money, they do indicate that there is increasing flexibility in terms of the types of property available to would-be tenants in the PRS.
“The recent expansion of the PRS for those unable to buy reinforces the need for greater institutional investment, which was acknowledged in the Budget through the Chancellor’s amends to REITs and Stamp Duty on bulk purchases. The Government must recognise however that these investors see consumer protection as paramount to protecting reputational risk, and so regulation is urgently required if there is to be an influx of landlords into the sector.
“Landlords with a greater valued asset recognise that by using a regulated ARLA member, their money will be protected by a client money protection scheme, a service which many unregulated agents do not offer. ARLA members can also market the property more effectively through PropertyLive.co.uk, the only property portal which uses professional, regulated agents.”
ARLA research also showed a slight rise in the average capital value of rental flats, from £258,500 to £267,400 (a 3.4% increase). Again, this occurred mainly in central London (4.7%) and the South East (4.4%), with a 1.7 per cent drop in the elsewhere in the UK.
“Lincolnshire and the East Midlands appear to be following the national trend, having recently acted for landlords with exceptional family homes in the area.
“Historically, these types of properties would have attracted tenants without the financial means to live comfortably, and we would have advised clients to accept a possibly lengthy void period whilst a strong tenant was found. However, the calibre of tenant has risen along with the type of properties coming to the rental market.
“This trend seems set to continue particularly in and around Lincoln, where commercial development is flourishing and attracting new business and employment to the area.”
Jill Elkington, Residential Lettings Manager, Hodgson Elkington LLP, Lincoln
Greater Manchester and Cheshire
“The BBC relocation to Manchester and that of another major PLC to the region has certainly bolstered demand for good quality family sized accommodation in this area and that demand continues to outstrip supply.
“Over the past 12 months, there is no doubt we have let many more properties with a capital value of between £400,000 and £1 Million plus, and even a quite a few in the £2 Million to £5 Million price range, with rents reaching a eye-watering £25,000 per calendar month.”
Philip Chadwick, Director, Gascoigne Halman in South Manchester and North Cheshire
“Although we have experienced a shortage of property this year whilst landlords have returned their properties to the sales market, the demand continues to grow and in recent weeks, some high quality family homes have been coming onto the rental market. Having seen many landlords return from abroad last year we are now seeing more who will be relocating abroad this year and are getting their homes in order to let in the summer.
“In addition, demand has increased from professional couples unable to secure mortgage finance, and we are also seeing longer-term tenancies.”
Theresa Wallace, Director, Savills in Kent
“In Wolverhampton we have had a large rise in instructions in the last quarter, compared to the previous quarter, as more and more people struggle to sell their properties in the depressed sales market.
We have seen a particular rise in larger detached properties located in the better parts of town and rural locations in the surrounding villages.”
Sally Lawson, Managing Director of Concentric Lettings in Hilton, Staffordshire
“In Sussex we have been experiencing low property stock for a few months now. Recently however, there has been an increase in the number of properties coming on to the market that cannot be sold; mostly larger family homes. We have also seen a number of tenants downsizing in order to save themselves money each month.”
Amanda Jones, Branch Manager for Leaders in Eastbourne, Sussex
“Cardiff is still experiencing a shortage of high quality family homes coming to the rental market; the past decade has seen developers in Cardiff Bay concentrating on one and two bedroom apartments and as a result young families are finding it difficult to take the next step.”
Derek Richardson, Director, Square Foot Estate Agents, South Wales
“Demand in Essex is increasing for all types of properties, although there is a huge shortage of three and four bedroom homes, with a large percentage of Housing Benefit tenants moving into the PRS due to the lack of social housing available in the area.
“For every available house, there are usually at least three or four applicants; which only further strengthens the Buy-to-Let market for landlord investors.”
Sarah Holdsworth, Owner of Prime Property Management, Essex