Camden rents fall nearly 7 per cent in May as tax changes and Brexit begin to bite
PUBLISHED: 17:02 06 June 2017 | UPDATED: 17:02 06 June 2017
New tenants can expect to save £70 on monthly rent compared to May of last year according to new figures, which saw rents fall for the first time since December 2009
Rents in Camden and the City of London fell 6.9 per cent in May compared to the same month last year, according to figures from insurance provider HomeLet.
The average rent per month is now £2,099, compared to an average of £753 in the UK as a whole excluding London, a 0.5 per cent fall on 2016.
In neighbouring Haringey and Islington, rents fell 6.5 per cent to an average of £1,452 per month. The household rent to income ratio in the two boroughs has reached 31 per cent, suggesting a crisis of affordability.
Rents in London fell 3 per cent in May, whilst rents in the UK as a whole fell by 0.3 per cent compared to 2016, the first fall since December 2009 on an annualised basis. Martin Totty, CEO of homelet.co.uk said: ““May 2017 saw average rents nationally fall for the first time in eight years when the economy had suffered the shock of the financial crisis. HomeLet rental data suggests landlords are now facing a difficult balancing act between ensuring rents are affordable for tenants in a low real wage growth environment whilst covering their own rising costs.”
The 3 per cent stamp duty surcharge on second homes introduced in April 2016 made stamp duty more onerous for buy-to-let landlords.
April 2017 saw the introduction of Section 24, a move set to increasingly restrict tax relief for landlords by taxing them on turnover rather than profit.
Mr Totty fears these changes will stunt the rental sector.
“Any constraint to the supply of rental properties, because landlords are unable to achieve the reasonable returns they require, cannot be in the long term best interests of tenants, especially if, as we’ve now heard from all the main political parties, the UK’s population continues to grow,” he said.
Conversely, there are hopes that buy-to-let landlords leaving the market will free up less expensive proeprties for first time buyers who have up until now been reluctant renters.
Those taking up new tenancies and hoping to save a pretty penny are also in luck, with a saving of £70 on rent per month in comparison to this time last year, with average rents falling from £1,572 to £1,502 in London in May.
There are 4.3 million private renters in England. Camden and the City of London is disproportionately made up of flats, which tend to be rental properties, with HomeLet revealing that 97.1 per cent of properties are flats, with semi-detached homes making up just 0.7 per cent of housing stock.
In neighbouring Highbury and Islington, 84 per cent are flats, whilst in the UK as a whole, a far smaller proportion of properties are flats (43.5 per cent).
Along with tax structure changes and an oversupply of mid priced new build properties, Chris Christodoulou, author of the NW3 property blog explains that Brexit has also had a bearing on the local housing market. .
“We do have quite a lot of people from the European economic area and some of them have jobs whereby the Brexit issue may have an effect on them and their future prospects here,” he said.
However, the fall in rental values could also be the result of a natural levelling off.
“There perhaps is a situation where the rents have reached a certain level and they’ve plateaued,” suggested Christodoulou. “Normally rents will rise in line with inflation. Over the last few quarters, I cannot see that trend prevailing.”
Although the savings could be good news for tenants, it might be come with its own set of problems.. “Tenant demand has become suppressed because prices are falling,” he said., “We’re also experiencing a fall in the level of tenant enquiries looking to rent property. So there’s less movement in the market.”
Suppressed demand is adversely impacting the lower to middle end of the market, but Christodoulou suggests that properties charging rents of over £1000 a week at the upper end are disproportionately affected since those tenancies are largely taken up by the corporate sector.
“Big multi companies are not sending over personnel in numbers any where near that they have been in previous years, and I think the Brexit issue has some accountability for that.”
So how should landlords respond to lower supply and falling rents? Christodoulou urges them to keep their properties in top condition in order to remain competitive.
“It’s important that landlords are on top of their game and in some cases keep rents the same, not put them up and wherever necessary perhaps offer a slight reduction in order for them to be competitive amongst all the other offerings in the local market.”