Average UK rents outside of London increased by 2.3% in 2020, up from 1.6% annual growth in Q3 2020. This rental growth was underpinned by the continued rise in demand, up 21% year on year in January in UK rental market excluding London. In contrast, average annual rents are down -8.3% in London, with rental declines concentrated in inner London amid rising supply and weaker demand.

Some larger cities including Manchester and Birmingham are also registering rental declines of -0.9% and -0.8% respectively, although the ‘search for space’ ethos is driving demand in the wider commuter-zones surrounding these cities, creating an upwards pressure on rents.

Rental values in 2021 set to be underpinned by constrained supply in many markets. The outlook for city centre markets is dependent on effective rollout of COVID-19 vaccine allowing return to ‘business as usual’ and kick start a return to more mobility across the country, and internationally.

This content was taken from Zoopla’s, UK Rental Market Report Q4 2020

New regulations being implemented on 25 November 2020 will allow non-UK nationals in England to evidence their status for Right to Rent through a digital Home Office check and reduce letting agent workloads. Going forwards, the new system will mean that these digital checks specifically, can be conducted permanently via video call, with no need for letting agents to review documents.

New Process

The system will clearly display whether follow up checks are required and provide a record of the check for the agent to store. Some additional checks will still require documents from letting agents, as not everyone will currently have an immigration status that can be checked online. Therefore, agents must be prepared to continue conducting traditional checks involving the original documents.

Digital Checks Required

Groups that may present you with a share code for a digital check are:

  • Non-EEA nationals with a current biometric resident permit or card;
  • EEA nationals and their family members with status granted under the EU Settlement Scheme;
  • Those with status under the points-based immigration system;

 

The Home Office has updated the existing Code of Practice, and these include reference to the status of visitor nationals – known as B5JSSK nationals – from Australia, Canada, Japan, New Zealand, Singapore, South Korea and the USA, which were introduced in July 2019.

A new Short Guide to Right to Rent has also been published, within which, the existing visual reference tool designed to provide examples of relevant identity documents has also been updated.

Where can a tenant/applicant obtain a ‘share code’?

The share code for these new digital checks for tenants/applicants to use can be created via the following link: https://www.gov.uk/prove-right-to-rent

Where can I view a tenant’s/applicant’s right to rent? 

You will be able to view a tenant’s/applicant’s right to rent via the following link: https://www.gov.uk/view-right-to-rent

What about Brexit?

Brexit is another external force which may yet have an impact on how these checks take place and the criteria which applicants should meet. Before the UK’s transition period comes to an end, we will continue the right to rent checks with nationals of the European Union as per the current requirements. EU, EEA and Swiss citizens living in the UK by 31 December 2020 will have until 30 June 2021 to apply for the EU Settlement Scheme.

Until this deadline, landlords can accept passports and national identity cards of citizens from these areas as evidence of their right to rent during this period. After this period, the government has announced a new points-based immigration system to come into force on 1 January 2021, which will require proof of a job offer at the required skill level from an approved sponsor, and that they speak English. However, the right to rent checks have still not been explicitly defined after the deadline for the EU Settlement Scheme passes.

If you would like to find out more information regarding these changes, please complete the below contact form and a member of our team will be in touch.

Their latest research provides insights into the annual change in rental growth across the UK, regional and city-level market insight data and their predicted outlook for the rental market in the coming months.

Two-speed market

Average UK rents outside London rose by 0.7% in the three months to September, taking the annual growth rate to 1.7%. Rental growth remains in positive territory across most regions and cities in the UK. This is in sharp contrast to London, where rents fell by -3.2% in Q3, taking the annual decline to -5.2% at the end of December.

This two-speed market is likely to be entrenched during the additional lockdowns in England and across the regions, which will exacerbate the trends which is causing the split in rental performance, especially as more people work from home.

Demand and Supply

Rental growth is being underpinned in many areas by the continued imbalance between tenant demand and the supply of rental properties, with rents rising in most cities across the UK. Renter demand has moderated from the highs seen in early summer after the first lockdown ended, but year on year, demand is still around 20% higher than in the same period in 2019.

The challenges in the mortgage market for first-time buyers trying to obtain a home loan, given the current squeeze on lending for those with smaller deposits, means that many of these aspiring homeowners will be staying in the rental market for longer, underpinning demand. This comes as overall supply into the rental market from individual landlords has been constrained. The return of students to University as usual in the Autumn will also have boosted demand in the rental sector.

Rental growth is being underpinned where demand is outstripping supply. In the West Midlands, rents in Birmingham, the largest rental market in the region, narrowly dipped into negative territory in September. The city may be starting to feel the impact of changing working patterns, with demand in some city centres being affected by limited office attendance, as well as new-build supply coming into the market creating more choice. In the North West, rents have increase by 1.8% although rents in Manchester dipped slightly by -0.1%.

There is also increasing sensitivity about rental levels in some regional and city markets due to muted earnings growth. Average pay in the private sector fell in real terms in April, according to the latest official data, and this pressure on wages is likely to have continued through the summer. These factors could cause a gradual slowing in rental growth in the months to come, but the UK market outside the capital will still outperform London.

London focus

The rental declines in the capital reflect the changing picture on working and commuting patterns and tourism. At the start of lockdown, there was a shift from short-lets to long-lets, especially in the centre of the city, pushing up supply in the sector which is still being absorbed.

The market is highly localised however, with the balance between supply and demand a key factor determining the movement in rents. The central London rental market is being affected by the changes in working trends, with rental property typically used by workers staying in town for part of the week coming back to the market as many continue to work from elsewhere. The muted tourism during Summer and Autumn mean that any short-let landlords who had not switched into a long-let option may be choosing to do this now.

Demand remains stronger for rental property in outer London boroughs however, stretching supply and underpinning rental growth. The housing stock available in mid and outer London zones, with more houses and outside space, also fits with the search for space being seen across the rental market as a whole. The data suggests that landlords in the rented housing market are making fewer cuts to asking price, highlighting demand in this sector. This also underlines the fact that headline rents in London are covering markets which are becoming more distinct, namely rented single-family houses, single-family flats and houses of multiple occupation.

 London exodus?

There has been an uptick in activity in some more suburban or urban rental markets, reflecting a cohort of renters who are choosing to make a change to how and where they live. However, the data shows that most Londoners are looking for rental property within the capital, so the idea of a large-scale move from London is probably an overstatement. The proportion of Londoners looking to stay in the city has risen compared to last year.

 Search for Space across the country

Just as in the sales market, the data indicates that renters across the UK are also reassessing the property in which they live. In some markets, rented houses are now being snapped up more quickly than flats, indicating the additional space, often with a garden, is increasingly attractive for renters. The average time taken to rent a house is now 16 days, down from 20 days last year. The time between listing a flat and let agreed is 18 days, also down from 20 days last year.

The most popular search terms for rental property also reflect the emphasis on space for renters, with Gardens, Parking, Garage and Balcony, topping the list. The fifth most popular search term is pets, with renters looking for pet-friendly accommodation.

Outlook for rents

The two-speed market across the UK is likely to remain in the coming months, as the lockdowns across the regions entrench some of the trends around working and commuting patterns seen during the previous lockdown and over the summer.

However, moving into next year, more large urban centres could see supply start to catch up with demand, especially in the city centres, which could put downward pressure on rental growth. There will also be more turnover in some parts of the market once the eviction bans are repealed into next year. Earnings growth, which is set to be subdued this year, is forecast to pick up again in 2021, however. This could allow more headroom for rental growth in some areas, especially if there is a return to more frequent office working.

Original content taken from Zoopla’s Market Rent Report, November 2020.

 

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Zoopla released their UK Cities Index Report for February, stating that UK house price growth is 1.6%, a 1.2% increase compared to a year ago, with cities in the North and the Midlands continuing to dominate. The COVID-19 virus has had a rapid impact on housing demand which is 40% lower in the week ending 20th March, however Zoopla have stated that they do not expect house prices to fall significantly in the short term.

A rebound in consumer confidence saw the housing market register that strongest start to the year in five years, after a weaker period of during 2019. This rebound in consumer confidence has resulted in the headline rate increase of 1.6%, in comparison to the 1.2% increase a year ago.

At a city level, the annual price growth ranges from 3.8% in Nottingham to -2.2% in Aberdeen. In London, the annual house price growth of 0.5% an increase from -1.1% in February 2019. The Northern Powerhouse cities: Manchester, Liverpool, Leeds and Birmingham have all also witnessed an annual house price growth of 3.3%, 3.0%, 2.8% and 2.6% respectively.

Despite the strong start to the year, the arrival of COVID-19 has totally changed the dynamics of the market and the outlook for 2020. Zoopla reported the week ending 20th March, new buyer demand fell by 40% as households self-isolate and put major decisions on hold, such as buying a new home. It has also been anticipated that demand is set to fall further now the UK has introduced lockdown restrictions for the foreseeable future.

Original content taken from Zoopla’s UK cities house price index report, February 2020.

Rishi Sunak, the Chancellor of the Chequer, delivered his first Budget Statement to the House of Commons earlier this month, outlining proposals for changes to taxations and included forecasts for the UK Economy. During this announcement, he also made several pledges to support the housing market, which we have summarised and provided a brief overview below.

Stamp Duty Surcharge non-UK Residents:

It was confirmed that a new stamp duty surcharge of 2% for non-UK residents buying a property in England and Northern Ireland will be introduced from 1 April 2021. This new stamp duty surcharge was initially outlined the Conservative Party’s 2019 General Election Manifesto.

What does is stamp duty surcharge mean of non-UK residents?

Properties that exchange after the 11th March 2020 will be impacted by the 2% surcharge if the property is due for completion after April 2021. However, regardless of when the completion date may be, if you exchanged on the property before 11th March 2020, the current understanding is that the new additional 2% surcharge will not be applicable. The UK Government is still yet to provide further guidance regarding this additional surcharge.

 Grenfell Building Safety Fund:

The Chancellor also introduced a Grenfell building safety fund of almost £1bn, which will be used to remove ACM cladding from residential buildings taller than 18 metres. Further guidance regarding this is due to the published regarding how residents, leaseholders, or developers could access the funds etc.

 The Affordable Homes Programme and the Housing Infrastructure Fund

A £12.2billion extension to The Affordable Homes Programme which will now run until 2025, was also pledged by the Chancellor. This programme was initially introduced in 2016 and was scheduled to end in 2021. In addition to this, the Housing Infrastructure Fund will also be allocated an additional £1.1billion to build almost 70,000 new homes in high-demand areas.

The Treasury Green Book review

The Chancellor announced plans to review the rulebook that government uses to appraise and evaluate spending decisions. This could create a significant geographical change in the distribution of funds, which have previously been heavily directed towards London and the south/east regions of the UK. In future, public investment will be set to deliver wider economic, environmental and social benefits across the country as a whole.

All the above measures outlined by Rishi Sunak are aimed to provide support and restore confidence to the UK housing market. If you are looking to make some changes to your investment portfolio or would like to find out more about how the 2020 Budget announcement may affect you, please contact our team at reception@complete-ltd.com.