Rental Market Update

2016 has been a year that we won’t forget fast: a Brexit referendum, a Trump election, the prospect of real uncertainty in the European elections next year and the possibility of the Government banning letting agent arrangement fees.

Looking forward into the beginning of 2017, the impact of Brexit is likely to mean buyers will remain cautious throughout Central London. Uncertainty in the sales market should push demand into the rental market from those reluctant to commit to a purchase. We may also see an increase in the number of unintentional landlords bringing properties to the rental market that perhaps aren’t shifting on the sales side at this moment in time. This means landlords will need to remain competitive in their asking rents and flexible on terms in order to attract potential tenants.

Despite this uncertainty, it is thought the outlook for rents is stronger and more stable than for sales prices. The barriers preventing one getting on the property ladder remain high, meaning renting will remain the occupation of choice, mainly for younger households. We have seen a large number of renewals this year with tenants opting to stay where they are until they have a clearer picture of where the property market is going.

Although renting is thought to remain the occupation of choice, with the added cost of Stamp Duty Land Tax applicable to buy-to-let landlords, it is thought that tenants may see the extra costs passed onto them through an increase in rents. On the other hand, many investors potentially looking to purchase a buy-to-let may decide against it due to the outgoings in many cases now outweighing the initial incomings. This could therefore lead to a shortage of rental properties in the comings years.

‘An ever increasing proportion of the population is looking to rent. By 2025, we know that there will be a 1.8 million shortfall in rental properties and that could mean a rise in homelessness,’ said Jeremy Blackburn, RICS.