UK Rental Market Showing Signs of Stability
The rental market in the UK appears to have recovered from what was a difficult start to 2012, according to residential property experts Move with Us. After showing signs of initial declines in the quarter, average rental rates stabilized later in the quarter, averaging around £970.
The third quarter rate was a slight decline from the Q2 average, but prices have increased by 2 percent or £20 over the last 12 months.
In the prime London market, rents also stabilized at £2,270 per month. Yorkshire and Humber were the best performing regions in the quarter, Move with Us said, experiencing price increases of more than 7 percent.
According to Move with Us, the firm's first "Rental Index" covers the most comprehensive picture available of rental prices for the UK. The report uses weekly data, tracking more than 150,000 advertised rental properties across England, Wales and Scotland.
Robin King, Director, Move with Us commented, "The index confirms a consistent and increasing demand for rented properties across all regions," said Move with Us director Robin King. "Many aspiring homeowners struggle to qualify for mortgages which is leading to increased demand in the rental sector. These long-term renters are demanding higher quality accommodation and look to stay for much longer than we have previously seen."
Over the past 15 months, Move with Us points out London experienced large fluctuations in rental rates, including a period of price inflation in the lead up to the Olympics. Rental prices are still more than twice the national average but have fallen back to more affordable levels in Q3.
Though London rates have fallen to around £2,270 after peaking at £2,411 during the Olympic highs in June, Londoners saw rates bounce back by 0.2% in the last two months of the quarter.
The two shining stars in the latest report is Yorkshire and Humber. This area has one of the lowest and most stable average advertised rental rates in Great Britain, so a 7 percent increase in rents was unexpected, Move with Us said. The average rent is now closer to the rest of the North and Midlands, at around £602 per month, compared to £559 at the beginning of the quarter.
"Yorkshire and Humber is an area to watch, with what seems to be a surge in demand for rented accommodation in an area largely associated with home ownership," King said. "This resulted in rents increasing by 7% in the last quarter. Alternatively, rents may just be catching up with those in surrounding areas."
"Overall, we should expect further rent increases in Q4, with the majority of regions continuing along their current trends. However, these may be short-lived as the economic effects of low wage inflation coupled with higher energy and fuel costs start to bite."
In other parts of the UK, the average advertised rents in Wales behaved in a very similar way to the rest of the UK in the last quarter, with sharp increases after a 6% decline in the first half of 2012. Wales had the second largest rise in rental price of any region in Q3, with a 5.6% increase from £604 to £640 over a three-month period.
Rental price levels remained at this level to the end of the quarter, suggesting that this is sustainable.
Meanwhile, in Scotland, advertised rental price levels in Scotland have remained below the July 2011 rate for the final part of 2011 and much of 2012. This quarter has been no exception, with a fall of around 1% after an initial increase of 1.3%.
Signs of a recovery in August were dashed by a further 0.25% decrease, leaving rents at close to 2% lower than those experienced in July 2011 levels and 1% lower than the same period last year. Average rental prices in Scotland, at £657, are £337 below the British average.