Rightmove, the UK’s leading online property site, release details of rental trends in Q3 of 2017. Sam Mitchell, Head of Lettings at Rightmove, analysed Q3 2017 data against previous quarters in the year and the last 2 years.
With the 3% stamp duty deadline in 2016 increasing transactions by 80%+ (majority were buy-to-let properties) and subsequently market supply, it was noted that this level of supply had held strong over a longer period of time than anticipated. Looking at the Section 24 tax, which will phase out mortgage interest relief, landlords have been expected to sell up as their profits are hit. This hasn’t happened yet, but it appears this is because of the phased structure of removing the relief and many landlords will be unaware of the impact until tax returns are filed in April 2018.
New listings on Rightmove are keeping pace with 2016, and higher than 2015, but this could be the residual volume of properties available to let from the stamp duty rush last year. However, available properties are significantly higher than 2016 and 2015, which indicates it’s currently a much harder market. The level has dropped from the end of Q2 to date, which is a common seasonal trend as demand picks up in September. Landlords are urged to consider the length of the tenancies given to ensure that their property doesn’t become available in harder months, such as the Christmas period.
National asking rents outside of London dropped by 2% in Q3 of 2017. It’s highlighted that it’s very rare to see a drop in rents in Q3 of a year. This drop was fuelled by the South East with prices down 2.3% on last quarter and annually for the first time. This was due to steadily increasing supply since 2016’s second home stamp duty tax rate increases. In London, prices continued to drop with asking rents now at their lowest level at this time of year since 2013. Though a drop in supply and increase in demand could see prices start to rise again from Q4 of 2017 onwards. Properties are also taking 8% longer to let outside of London and 5% longer in London.
The national average asking rent in Q3 was £789, a 0.2% drop from Q2 of £790, which was already down by 2.8%- equating to a total drop of 3% over Q2 and Q3 of 2017, although the annual average is still up by 1.2%. In London, average asking rents are down to £1920 in Q3 from £1934 in Q2 and down by 3.3% annually. London may see prices begin to increase as Q3 data showed that supply was down 3.7% year-on-year whilst supply was up by 11.1%- potentially creating an upwards rent pressure of 14.8%. Meanwhile, in the East, supply is up 10.1% YOY and demand down by 9.5%, which could create a negative rent pressure of 19.5%.
Don’t be dismayed by this quarter’s analysis, it shows that landlords need to work smarter to get the right tenants in their properties and utilise available tools and information to market properties effectively online. Professional photography and Featured Listings can massively increase tenant interest- more important than ever in today’s climate.