The state of the housing and renting industry is very volatile and fluctuates. However, renting has increased across England and Wales by 1.2% over 12 months up to February 2019. As you can see in the graph below, UK rental prices have been on a steady increase since 2015, bumping up 7%. (www.ons.gov.uk). In this blog, we are going to explain some of the reasons for this increase and what affects this then incurs.
The increase in the price of renting a property has gone up and I will highlight a couple of the main reasons that have caused this increase:
Brexit could be one possible explanation for landlords increasing the price of rent, is it a coincidence that since the vote in June 2016 rent prices have continued their increase…some experts have said that Brexit has “no credible circumstance that a landlord can use to push up rent other than greed and opportunism” (inews.co.uk) some have actually suggested that Brexit could produce a positive in the letting market as fewer people are buying and selling properties. However, depending on who your landlord is and where you live, landlords could be increasing the price of rent as a contingency due to the uncertainty surrounding Brexit.
Another factor is that the government has now ‘inflicted tax changes among other legislation including a 3% stamp charge on properties that aren’t their main home’ (more information at Thisismoney.co.uk). These changes have ensured that the buy-to-let properties are less lucrative and this has created a shortfall in the number of properties purchased to be let out. Therefore, it is a simple supply and demand chain of events, there are more people wanting to rent but less available houses which has caused this increase in rental prices.
These factors have caused an increase in rental prices and so have had a knock-on effect for people. This is clearly a benefit for the homeowners that receive more money each month. However, with wage stagnation and the cost of living increasing for those renting, it’s going to affect those trying to get on the property ladder. Coupled with the new restrictions putting people off going into the buy to let industry has caused “reducing supply, it remains an uphill struggle for those priced out of the property market and stuck in the rental sector” (propertywire.com), this supply and demand chain leading to increased costs has reduced the amount people can save each month and prolonging when they’ll be able to afford to buy a house. This could cause a gulf meaning some are stuck in a rental trap and could potentially be life-long renters and increase the number of people in this situation.
The bump in rental prices doesn’t just affect the housing market but can affect the economy as a whole; due to young people not being able to afford to rent as it takes up a high percentage of their income. This means that it can affect their ability to access jobs and stop them from getting their first graduate job or progressing their career – “Higher rents are reducing the financial gains from moving to better-paying parts of the country, and mean that young people are less mobile” (www.resolutionfoundation.org) therefore making it harder for firms to fill skill gaps and positions, but also restricting individuals’ career prospects, the ability to gain skills, develop and henceforth earning higher wages to afford to live in better-paying parts of the country.
To conclude rental prices have been going up and appear as if they will continue this increase due to uncertainty in the current economic climate, and due to the fact buying-to-let properties are now not as worthwhile, creating a supply and demand gulf that may continue to grow. If this occurs it could mean a slow decrease in the number of properties available to rent and therefore likely to cause even higher or prolonged rental increases. The negatives that are caused are on people and the economy which are evident to see from the increase, it means skilled workers may not be able to access high-level jobs and businesses may not be getting the best personnel in their recruitment. As well as this, with rental prices taking over a higher percentage of individuals income it means these people will have less expendable income to spend.
More information on the links used at:
To read more on the www.ons.gov.uk link – Click here
To read more on the www.inews.co.uk link – Click here
To read more on the www.propertywire.com link – Click here
To read more on the www.thisismoney.co.uk link – Click here
To read more the on www.resolutionfoundation.org link – Click here