EAST Midlands rents are expected to rise as fewer new properties are put on the rental market according to the July 2018 RICS UK Residential Market Survey.
Demand in the East Midlands lettings sector has long outpaced the number of new properties coming to market but this month 27 per cent more respondents reported a fall in new instructions and is the fifth consecutive quarter in which this indicator has recorded a negative number.
This pattern reflects the shift in the buy-to-Let market in the wake of tax changes which are still in the process of being implemented, as smaller scale landlords exit the sector. Significantly, the drop in instructions is evident in virtually all parts of the country to a greater or lesser extent.
At the headline level the number of new tenants looking for a new home in the East Midlands is flat, but with the volume of fresh rental stock continuing to decline, demand for rental properties continues to outpace supply.
The consequence of this imbalance is that rents in the region are expected to rise once again. In the coming three months, 30 per cent more respondents expect rents to rise, and at the 12 month mark the East Midlands expectations are one of the strongest in the UK, with rents projected to increase by two per cent. This is also reflected at the five year point where rents are expected to rise by approximately three per cent.
Looking at the East Midlands sales market, little has changed from June. It is perhaps no surprise that as speculation built ahead of the August Bank of England rate rise, the number of people looking to buy a home in the region continued to fall. Whilst the number of new properties coming to the market seems to have improved in July, the net balance is flat and the survey suggests chartered surveyors don’t anticipate much growth in sales activity in the coming three months or year ahead.
Despite the little change in activity, and stock levels remaining near all-time lows, the East Midlands housing market is still stronger than other parts of the UK. Prices continued to rise in the last month and expectations edged up to plus two per cent from minus three per cent in July. London, the South East and East Anglia have seen activity and as a result now prices starting to fall, albeit slightly, in their regions.
Simon Rubinsohn, RICS Chief Economist, said: “The impact of recent and ongoing tax changes is clearly having a material impact on the Buy to Let sector as intended. The risk, as we have highlighted previously, is that a reduced pipeline of supply will gradually feed through into higher rents in the absence of either a significant uplift in the Build to Rent programme or government funded social housing. At the present time, there is little evidence that either is likely to make up the shortfall. This augers ill for those many households for whom owner occupation is either out of reach financially or just not a suitable tenure.”