Rents Seen Stagnating - But Not Falling - For The Next Year
Average rents across the UK are expected to hold steady around current levels over the next 12 months, as uncertainty surrounding the coronavirus and the Government's exit strategy from current emergency lockdown measures weigh on demand for new rental contracts. That's a different view from the Royal Institution of Chartered Surveyors' (RICS) latest housing market survey, which in previous months and throughout much of 2019, reported expectations for further, notable rent rises.
According to the RICS March housing market report, survey respondents noted widespread uncertainty across the market and those fears are largely are based on uncertainty in the current crisis.
Rents seen stable over next 12 months
RICS surveyors are now expecting a different scenario for the UK’s rental market and future rents than they were earlier in 2020 and throughout 2019. The March survey shows that rather than expecting rents to rise in the next 12 months, they anticipate the average rent across the UK will remain at around current levels.
It also makes it clear the reason for that outlook is related to coronavirus-related uncertainty rather than the way the different elements of the rental market. Indeed, the survey also shows that tenant demand remains at similar levels to recent months and that supply of rental homes has declined. Against any other backdrop, that supply and demand mis-match would likely result in expectations for rents to rise.
The report also shows that over the shorter term – the next three months - surveyors expect rents to decline due to the pandemic. However, further out they anticipate rents will remain stable over the next year and to increase by around 2.5% per year, over the next five years.
That outlook bodes well for tenants as it suggests they won’t have to pay higher rents in the aftermath of the lockdown period. However, even though rents are currently still expected to rise in the next five years, that might not be enough encouragement for landlords to grow their portfolios right now.
Up to 40% of tenants unable to pay rent
In a separate survey, one online letting agent reports that some 40% of UK tenants are unable to pay their rent right now. The survey of 1,000 tenants showed that an inability to pay rent was the top concern among tenants right now, as they struggle to pay all their bills at a time when not everyone is earning full pay.
One estate agency in Scotland has come up with their own way of handling the current situation; to request tenants sign moral contracts as part of their commitment to repay rent in the future. The estate agency sends a letter to tenants who contact them explaining they are unable to pay their full rent during the coronavirus crisis.
“Your landlord has been made aware of your situation and we have communicated with them regarding your rental position,” it writes. “We are sending you this Tenant Charter as a moral contract to commit to working with your landlord and Murray & Currie Property and agree to unconditionally commit your intention to repay your rental shortly/arrears in full.”
The letter also includes a tear off slip for a signature to agree to making up rent arrears in the future, once they are able.
It’s likely such agreements could become more wide spread, the longer lockdown continues. However, provided both tenants and landlords are able to communicate and work out arrangements that are acceptable to both parties, then in many cases things will be resolved and the industry will continue to work well across the UK.
