Honourable and personal residential letting experts


Can rents increase anymore? Forecasts say yes

Can rents increase anymore? Well, a recent report from the rental platform OCASA has indicated that within 12 months, the average UK tenant could be paying £67 per month more in rental. This is on top of an increase of 7% for 2020 – 2021.

In East Anglia, the figure is even higher, at £75 per month. That is an additional expectation for 2023 of £898 per year.

Not surprisingly, London remains by far the least affordable region of the UK rental market, with the average tenant currently paying £1762 per month. OCASA also estimates that the capital’s tenants will see this cost increase by a further £95 per month over the next 12 months.

How does this match with our data on rents increasing?

We are totally in line with the findings  On average we have seen a 6.5% increase on rentals at the point we are renegotiating an existing tenancy, and an average increase of £179 per month at the point we are remarketing a property – as tenants decide to move on.

Nobody likes to see an increase in their overheads, however these figures would not be achieved unless they were affordable. In Cambridgeshire, we have the benefit of high employment which leads to higher salaries as companies work hard to keep their employees and to attract the best applicants. We can also report that at the point we are negotiating increases, 98.7% of tenants we work with are agreeing to the increase.

What is causing the uplift in rents?

There is one main factor and it comes under the heading of ‘supply and demand’.

In Cambridgeshire, we have seen that the vacant properties coming on to the market for rental have dropped by 36% since last year. From our data we have seen that 56% of this shrinkage is due to more mature landlords deciding to sell part, or all of their portfolio. The remainder has been due to overseas property owners returning to the UK and taking back their home. Unfortunately, this has not yet balanced up with the newer landlords coming on to the market. Therefore, as landlords move out of the private rental sector (PRS), more people are left looking at a smaller pool of homes.

Why are landlords deciding to sell?

There are several reasons, but in the main we have seen landlords that have been in the PRS for 20 years plus deciding that now could be a suitable time to capitalise on their investment. What can be achieved on the present open market, in some respect, pays for their loss of the annual income they receive from the rental and the amount of capital gains tax / fees that will need to be paid to sell the property.

Also, in 2007 /2008 the financial crisis meant that many more people became accidental landlords – it was never their intention of starting a portfolio. If you were around then you will remember that rental income dived as there was a huge oversupply of properties joining the PRS. So, you could say that it is just the market levelling up.

From a personal point, the landlords we work with do explore the option of finding an investor buyer first which means that the tenant is not left looking for another home. When doing this we are always looking to achieve a 4 – 5% return for the new landlord which, even in this market, is still possible.

In conclusion

• Rents increasing will continue as the supply of rental homes reduces.
• If you sell, you need to be sure of the outcome.Does the final cash in hand amount exceed your rental income for the next three months, pay the capital gains tax and agency fees?

If you want to buy give then team at Maxine Lester’s a call to see what return you can achieve when there is a tenant in situ. Call us on 01480 494939 or email [email protected]