I read a very interesting article in one of our professional journals the other day (all part of my Continuing Professional Development I have to undertake each year) about a recent letting in London. The house is an Edwardian Baroque style detached in Barton Street in the heart of Westminster and the rent has been agreed at £1,000,000 per year (yes, that’s £1m per year or £84,000 pcm). Admittedly, it’s about the same size as Clarence House, is 5-storeys in height, has 5 reception rooms, 7 VIP bedroom suites, 8 bathrooms, an 8-person lift, 13m indoor pool, jacuzzi, gym, etc. Much as though many will regard this as an obscene amount of money to pay in rent, it does highlight the issue of rising rents and how much people are prepared to pay.
The data I have for the area in which we operate in Leeds is showing a 2% rise on the previous 12 months with the average rent now standing at £672 pcm. This does not show the full picture however, as some mid-range and higher-end properties have fallen a little in some areas, whereas demand at the more affordable end of the scale continues to push up rental levels, especially on the newly refurbished and good quality stock. We recently let a 2 bed back to back in Burley for over £800 pcm on the first viewing. A couple of years ago £700 seemed to be the ceiling.
The average age of tenants in our area is 29 (excludes student HMO’s) with flats making up almost half the market, terraces a 1/3rd and semis and detached the remainder. We are inundated with enquiries for rented property and with an almost fixed/static supply in the areas within we operate, is there any wonder we are seeing a year-on-year increase. New-build developments around north Leeds tend to be detached, and although there are always a few tenants in the market for these, this isn’t where the shortage of supply exists. Young people need housing, especially couples, yet there is little in the way of new-build to suit them. As rents for smaller properties rise, there is an ‘inflationary’ effect on the larger, more expensive, properties.
Someone said to me last week, ‘When will rents reach their ceiling?” I said I didn’t think there would be one. For the 39 years I’ve been an estate agent, every time I’ve thought rents couldn’t go any higher, they’ve edged up just a little more. There’s been peaks and troughs, just like the sales market, but we’re now in a market where renting is becoming ‘the norm’ for a large proportion of the population, and unless sustained growth in the construction of new homes to satisfy the demand of these smaller families and young people, rents will continue to rise.
I’m sure there are many tenants who would like to see rent controls reintroduced, as a means to solving the rising-rent problem. That policy was utilised just after World War II, both here and in other countries such as the US. Whilst post-war redevelopment and construction saw many new homes built during this period, by the 1960’s and 1970’s excessive Government borrowing meant further state-funded development had to cease. With no new rental property being built i.e. council houses, rent controls simply led to a downward spiral of the rented sector. I believe the lack of rented property during this period fuelled the rapid growth in home ownership and mortgages, demand driving-up property prices making it even more difficult for landlord to justify investing in rent controlled housing in the private rented sector.
More supply is the key issue, but with little funding available, and a shortage of land where people want to live, I cannot see supply satisfying demand anytime soon. I don’t envisage £84,000 pcm rents in Leeds will be seen anytime soon either, perhaps not even in my lifetime. But I suspect estate agents in London back in the 1950’s were saying the same thing about London rent. Who knows?