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Rental demand drops to two year low

Industry Insight January 29th, 2017
Rental demand drops to two year low

Arthur takes a look at the changing scene for rental demand in the private sector, after it dropped to an all time low since records began in January of 2015.

Research by the Association of Residential Letting Agents (ARLA) showed that the number of prospective tenants registering per branch dropped to 26 in December. This is a drop from 32 in November and, as mentioned above, the lowed since records began. This decline in private rental demand, the ARLA states, is in fact in line with seasonal expectations.

However, it comes at a time where the number of properties an average letting agency branch has on its books is increasing. In the same month of a record low for demand, supply increasing from 195 to 188. Surprisingly, despite the saturation of the market, the ARLA also noted that letting agents were noticing an increased amount of rent hikes for tenants – increasing rom 3pc. to 19pc. on the month.

Research by RightMove has shown an average increase in asking rents of 1.3pc. over the year in the south-east, despite asking rents in London falling by 4.4pc., most of which happened after the historic Brexit vote in July. It was the north-west, however, that saw the highest increase in rental prices, with an increase of 4.4pc. in 2016 – although prices fell in the last quarter, in line with the rest of the country.

Power to the Tenant?

With a change in the rental demand of the U.K., it is highly possible that there may be a shift in negotiating power. A saturated market gives prospective tenants a greater ability to ‘shop around’ and negotiate prices, with the knowledge there are other properties available. Furthermore, the continuing rise of online property sites such as PurpleBricks and RightMove means the tenant has easier access to what is available. This could also spell trouble for traditional letting agents, 46pc. of whom expect to see a decrease in supply in 2017 – on top of renegotiating how their fees are paid due to Phillip Hammond’s change in policy.

2017 is only a month old and there are already a vast amount of uncertainties about the year. However, when there is uncertainty, property remains a safe bet when looking to invest.

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