Rents increased by 2% in May, compared to the same month last year, according to the HomeLet rental index. Tenancies signed in May 2018 have an average rent agreed of £919 per calendar month (including London, when we exclude London, this figure falls to around £763pcm).
Over the last year, rents rose in all but one of the 12 regions included in HomeLet’s research whilst a new study by the General, Municipal and Boilermakers (GMB) Union has also looked at rent increases. the study shows that the average of monthly rent has reached £1,500 in London. Meanwhile, the rest of the country has seen an increase of 18.2% in average monthly rents between 2011 and 2017. Leicester experienced the fastest growing rents which you can read about here.
The average rent rise in London, as pointed out by the GMB union, is disproportionately larger to the rest of the country with an increase of 26% over the same period. The unions suggests that the real issue is those struggling with dramatic rent increases where their personal incomes haven’t risen in line with the rent increases. A spokesperson has said with regards to how dramatic rent increases affects members of GMB union:
If employers don’t respond with higher pay they will face staff shortages as workers, especially younger people, are priced out of the housing market. It makes little sense for these workers to spend a full week at work only to pay most of their earnings in rents. There is no alternative to higher wages to pay these higher rents, plus a step change in building homes at reasonable rents.
However, on the other hand of the argument is the necessity of whether landlords have had to dramatically increase rents so much over the last two decades. There is likely to be an element of greed in many cases of rising rents but nonetheless, it’s certainly isn’t going to change, especially with the incoming tenant fee ban. Such rent increases will be welcomed by landlords up and down the country, especially those in Leicester who are faced with the prospect of planned licensing and Nottingham, which is already within the grips of Selective Licensing. As more legislation comes in, including the changes in mortgage repayment tax relief, stamp duty land tax changes and the Tenant Fee Ban, rents are, of course, going to increase. Landlords are not charities and it is high-time the government realises this. The increased costs forced onto landlords in an effort to drive them out of the private rented market will, for most landlords, translate into increased rents to allow landlords to absorb the costs while still maintaining ownership of their investment vehicle.
When we examine this argument, it seems to break itself down as it becomes apparent that earnings have actually fallen; with the recession and 2008 financial crises, coupled with slowly rising inflation and the economic uncertainty in the years following the crises, earnings didn’t stop falling until mid-2014 and whilst wages have started to rise in the last couple of years, wages in real-terms still haven’t returned to pre-2008 levels, according to the Office of National Statistics (ONS).
Falling average earnings doesn’t necessarily mean that everybody’ wages are falling, it’s affected by who is working too, those who are unemployed and on state-benefits will earn significantly lower and will be included in the statistics. Those made redundant during the financial crises explains the large dip around 2008/9.
The ONS shows that, in 2014, average earnings grew by only 0.1% which is significantly lower than the average yearly rent increase of 3.03% since 2011! It is clear rents largely increase due to rising costs faced by landlords year on year however, it is unclear as to the reasoning behind stagnating earnings growth after all, the economic health of most companies impacted by the 2008 financial crisis has now been restored so why hasn’t earnings growth?
One thing can be said with absolute certainty, the rental market, especially here in Leicester as experienced by Harry Albert Lettings & Estates is positively thriving with an average time to move a tenant into the property in less than 3 weeks!
- Affordable Property Management: https://www.leicesterlettingagent.co.uk
- 6 Things Your Agent May Be Dishonest About: https://www.leicesterpropertyinsight.co.uk/6-things-letting-agent-may-not-honest
- Free Landlord eClinic: https://www.leicesterpropertyinsight.co.uk/free-landlord-drop-eclinic-weekends
- Office of National Statistics: Understanding Average Earnings: https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/articles/understandingaverageearningsforthecontinuouslyemployed/2015-05-18#introduction