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Further landlord exits expected to push up rents – RICS

by: Karin Wasteson
  • 14/09/2017
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Further landlord exits expected to push up rents – RICS
Rental prices will drive upwards as 61% of surveyors expect a flurry of landlords to exit the market in the next 12 months, according to the RICS August survey.

The survey showed a national return to house price growth but the regional picture is very mixed with central London price growth particularly subdued, along with poor growth in the South East, the North and East Anglia.

Central London posted the weakest result since 2008, with 56% more respondents seeing a fall in prices. At the twelve month horizon, prime central London remains the only area in which price expectations are negative.

Meanwhile, the figures point to price growth in many parts including Northern Ireland, the North West, Scotland, and the South West.

“The latest results continue to suggest that the greatest pressure on both prices and activity continues to be felt in the prime central London market,” said Simon Rubinsohn, RICS chief economist.

“Although there are some signs that the wider South East is also losing some momentum, anecdotal evidence suggests the impact is very location specific. Meanwhile the numbers for most other parts of the country point to a rather more resilient marketplace,” continued Rubinsohn.

Conversely, new instructions have increased in prime central London over four of the last six months, with a relatively large pick-up reported in both July and August.  

The August survey contained an additional question to ascertain whether respondents felt more landlords would enter or exit the market going forward in the light of policy changes. Nationally, 61% believed landlords would exit the market over the coming year, while only 12% felt there would be a greater number of entrants. Moreover, for the next three years, 52% felt there would be a net reduction in landlords, with only 17% suggesting a rise.

“The number of landlords exiting the market due to recent policy changes is concerning, especially given house price rises,” said  Paul Bagust, RICS global property standards director.

He added: “A functioning private rented sector is crucial to a healthy housing market and it’s predicted that over 20% of all households will be privately rented by 2020.”

Moreover, respondents predict that over the next five years rental growth will outpace that of house prices, averaging three per cent, per year – versus two per cent for house price inflation.

“It is interesting that over the medium term, the conclusion of the latest survey is that rental growth is likely to outpace increases in house prices. Although the Build to Rent offer is now stepping up a gear, there clearly is some doubt as to whether it can do so at a fast enough pace to address the shortfall which may result from the more hostile environment for buy-to-let investors,” said Rubinsohn.

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