Will rent reductions last?

Will rent reductions last?

Against a backdrop of stories about the average cost of renting going up across most parts of the UK, it is perhaps a surprise to see that an increasing number of tenants are actually managing to negotiate their rent downwards.

A new report from ARLA Propertymark, a body representing professional lettings agents, shows that the number of tenants who successfully reduced their renting costs grew from 2% in September 2018 to 3.7% in October 2018.

This is the highest figure seen since records began in January 2015 and represents and 85% month-on-month increase. In addition, these figures contributed to fewer landlords reporting rent increases for the third month in a row; 24% of agents reporting that landlords increased rents in October, compared to 31% in September and 40% in August.

The question now is whether this will be a flash in the pan, or can we expect to see this trend continue into the future?

David Cox, the chief executive of ARLA Propertymark, said: “Last month’s findings indicate that power in the rental market could be shifting towards tenants, with a record number negotiating rent reductions, and less landlords hiking rent costs. However, it’s more likely that this is indicative of the time of year and come the New Year, we’ll see rent prices starting to creep up again.

“There’s no real way of avoiding it unfortunately – with landlords facing continued regulatory change, increasing costs will be passed on to tenants. Those who don’t pass the costs on will eventually have to exit the market, which will increase competition and boost prices. It’s the ultimate ‘lose, lose’ situation.”

That prediction is in line with estimates from the Royal Institution of Chartered Surveyors (RICS) in August 2018 which predicted a 15% rise in rents in the next five years due to a shortfall of available properties. There is not enough new building in the pipeline to satisfy existing demand, and if the amount of existing stock also decreases then the situation is likely to worsen and put even more pressure on rents.

Much like ARLA Propertymark, RICS attributes these upcoming rent rises to the government’s decision to reduce buy to let tax relief. Designed to make the market less appealing for investors are to increase the chances of first time buyers getting on the property ladder, RICS instead expects this policy to cause prices to rise.

Nothing is certain in the future, however it seems unlikely that rents are going anywhere but up in the coming years.

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