Increasing monthly rent prices
According to the latest Goodlord Rental Index, rents in April 2024 were up by nearly 6% when compared to April 2023. Increases were seen on a monthly basis too – rising by 0.6% between March and April this year.
More expensive monthly rents were also noted in HomeLet’s most recent rental index. It had the increases even more pronounced, claiming the average UK rent had risen by 7.9% in the last year, with a 1.6% increase during April.
It’s clear, rents are still in their ascendency. Isn’t that the news all landlords want to hear? If only it was as straightforward as telling a tenant the rent was going up and that the amount would continually increase in line with future average rises.
It’s worth noting that the rental figures that appear in indexes are often calculated exclusively using newly agreed tenancies. They are not reflective of the vast majority of tenant-landlord relationships, where the agreement is progressing through its term at the rental value that was agreed at the start.
Of course, landlords can raise the rent but there are strict protocols they must follow. As a reminder, landlords with renters on periodic tenancies can usually only raise the rent once a year. If the agreement is a fixed-term tenancy, rents can be raised once the fixed term ends, or as detailed in a rent review clause.
At the moment there is no upper limit on how much a landlord can raise the rent by (this may change, especially in London or if there is a Labour win at the forthcoming general election). The prospect of rent caps and limits on how frequently rents can be raised certainly looms large.
In play now and hampering the ability to raise rents are market values and ceiling limits. An article published by The Independent carried a stark warning for landlords: rents may soon be so high no one can afford them.
It’s the uncomfortable truth. Landlords can’t expect to keep raising rents and tenants to keep paying. As much as it is a ‘supply and demand’ situation, renters will have budgets that they need to stick to.
The continuing trend is for wages not to keep pace with rent rises – a situation made worse by stubbornly high inflation. According to the Office for National Statistics, annual wage growth in real terms between December 2023 and February 2024 (adjusted for inflation using the Consumer Prices Index including owner occupiers’ housing costs (CPIH) for regular pay) was 1.9%, and for total pay was 1.6%.
The gap between earnings growth and rent rises is one major barrier to landlords raising the rent. Also causing friction is an area’s ability to cope with higher rents. Many will have a ceiling limit, due to a saturation of one property type, the demographic or local demand – frequently a combination of all three. Landlords who raise the rent in these situations may be faced with extended void periods.
All this is being played out against a backdrop of mortgage rates that have started to creep back up, thanks to volatile swap rates. As a result, buy-to-let mortgages are still a pain point for those coming off fixed-rate products, with a rising number of landlords in arrears.
We’re finding selling a rental property is an increasingly valid option for landlords who’s local area or clientele can’t tolerate rent rises. If selling a house with tenants is increasingly on your mind, contact LandlordBuyer. We are professional property buyers who will purchase any buy-to-let for cash, even those with sitting tenants, short leases and below market value rents. Contact our team to learn more about exit strategies.