Belvoir CEO Dorian Gonsalves warns of further challenges to come, as years of flawed government policies continue to impact the market, resulting in stock shortages and high tenant demand.
“Taking into account that most of our offices are outside the London area, at the end of last year those Belvoir offices that have been trading since 2008 in England, Scotland and Wales were reporting average advertised monthly rents of £817” says Dorian. “This represents a large year on year increase of just under 9.5%. At the end of last year, most of Belvoir’s franchisees were predicting that rents were likely to stay the same or would continue to rise in 2022. Belvoir’s figures are comparable with data from other sources, with Zoopla recently reporting the strongest rental growth in 13 years. Rents do not typically rise or fall by more than +/-4%, so these are staggering figures.
“A cross-section survey of franchisees across the Belvoir network reveals that half are experiencing a shortage in all types of properties, from one bed flats up to five-bedroom homes. There is some regional variation, but franchisees in most regions are predicting that there is little indication of any easing in the shortage of available properties.
“When analysing the market, it is important to note the clear distinction between rental rises and rises in house prices. Rental increases are not due to Covid, or the race for space, and most definitely cannot be blamed on so-called ‘greedy landlords.’ The reason for these increases is 100% due to the barrage of flawed policies that the government has introduced in recent years, which have discouraged landlords from bringing new properties into the sector. These policies have included the introduction of higher stamp duty, the phasing out of mortgage tax relief, and the many stringent requirements placed on landlords to remain legally compliant. The resulting higher operating costs, coupled with increased maintenance prices, have left landlords with no option but to increase rents for new tenancies so that they can cover these higher costs.
“Estate agency saw unprecedented levels of activity in 2021, with numbers of transactions reaching around 1.5 million. This is expected to fall to normal pre-Covid levels of around 1.2 million transactions in 2022, although prices remain exceptionally strong. The latest twentyci report confirmed that sales agreed across the whole of the United Kingdom in 2021 were on average 13% greater than 2020, with double digit growth experienced in most regions.
Stock levels are now lower, and this reduction has been behavioural, exacerbated by events such as the stamp duty holiday, the post-lockdown race for space and access to cheap mortgage rates, which have enabled people to borrow more money and pay higher prices to obtain their perfect home. This is not the case with the PRS.
New landlords have been discouraged from purchasing new properties, which means there is inevitably less availability of accommodation for tenants.
“I predict that rental inflation will continue to increase at 8-10% for the rest of this year and will only fall back to previous lower levels of inflation if more landlords are encouraged to bring more properties to the market. The number of estate agency transactions are likely to return to pre-Covid levels in 2022, with further house price growth due to strong buyer demand coupled with low mortgage rates.