Two separate reports on rents conflict over the impact of the tenant fees ban.
Data from tenant referencing provider HomeLet claims new rents are rising at the highest rate for two years as the tenant fees ban approaches, but this is contradicted by the Deposit Protection Service.
HomeLet found rents were up 3.3% annually during March to £942 per month.
When London in excluded, the average rent in the UK is now £782, up 3% on last year.
Tenants in the south-west of England saw the largest increases, with rents up 5.8% annually, while rents in the capital remain the highest at £1,613, a 2.8% annual increase.
Martin Totty, chief executive of HomeLet, said: “With the Tenant Fees Act due to take effect in England from June 1, the acceleration we’re seeing in agreed rental values will come as no surprise to anyone.
“Whilst the aim of the Tenant Fees Act is to reduce the costs that tenants can face, landlords still need to cover the costs that are incurred when setting up a tenancy. With landlords already feeling the impact of taxation changes, the expectation is that costs will be passed back to tenants through higher rents, particularly for new tenancies.
“Landlords’ ability to increase rents will largely be determined by local market dynamics of supply and demand for property.”
Totty suggested landlords and tenants could still both benefit from the fee ban.
He added: “If demand for rental property remains strong, coupled with the lower frictional costs of moving between rental properties for tenants from June 1, landlords may yet be able to recover the additional cost burden they will face by edging up rents.
“This will likely require the current high levels of employment and real wage growth being sustained. But it could be the case both tenants and landlords get what they want – tenants are relieved of the one-time up-front burden of fees at the commencement of a new tenancy and instead landlords meet these costs and recover them over time via gradual increases to monthly rents.”
Average monthly UK rent is now at its lowest level for three years (since Q1 2016), according to a quarterly report by the Deposit Protection Service (DPS).
However, figures from the DPS, based on deposits it protects, found rents actually fell to £757 during the first quarter of 2019, with tenants paying 1.87% less than a year ago.
Of the UK regions, only the south-west, East Midlands, Yorkshire & the Humber and Wales experienced increases in average rent, although all were minimal, with the south-west seeing the biggest at 0.63%, the DPS said.
Daren King, head of tenancy deposit protection at the DPS, said: “The depressed market for rents is part of the larger slowdown that began during the summer of 2016 and which we believe is linked to broad economic factors affecting spending power and demand in the UK.
“We also believe that the rental market may be experiencing a period of tenant inactivity driven by uncertainty ahead of the imminent enforcement of the ban on tenancy fees.
“Even after a long period of stagnation, we don’t see many signs of a recovery any time soon and it is possible there will be more quarters of low or negative growth this year.”
The rents will go up when the fee ban takes hold. A lot of our landlords have started to raise this question and are putting rents up now so over the next 12 months the report will likely look a lot different. At the moment tenants are happy to pay the increase but not sure how long that will last. The proof will be in the open market. Its easier to increase a rent with a tenant in the property as in all likelihood they don’t want to move. Also landlrods with current tenancies wont have as many costs imposed on them until a new tenancy starts. This will hit new tenants who start to see marketing rents go up making it harder and more expensive for them to get into housing. That’s when we will see what effect this ban has.
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No reason why both can’t be right – its just typical lead and lag. Homelet will be referencing tenancies staring up to a couple of month in the future, whereas the DPS are registering deposits taken up to a month ago.
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Correct, just what I was thinking, one is the future the other, the past when there isn’t a fee ban!
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I personally don’t think you can contribute the rent increase to fee ban only, there are many factors causing this, lack of stock being the main. With BTL landlords leaving the sector and tenants staying longer this I believe is having a greater impact on rents
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