Around 8.7 million flats and houses in the UK are private rentals. That’s equivalent to around one third of all homes in the four nations. 

The growth is believed to be due to an increase in the number of tenants who, having been priced out of the housing market, are renting long-term. And yet, it comes at a time when local authorities are putting more restrictions on landlords in terms of selective licensing. 

UK private rental market worth £1.7trn

Octane Capital, who carried out the research, reckon the UK private rental market is now worth around £1.7trn. That means it has grown by £239bn since 2016. At a total worth of £500bn London properties are top of the rental market. That’s due to the high prices in the capital, together with the fact that it has around 20 per cent of all the UK’s privately rented properties/

Jonathan Samuels, chief executive at Octane Capital, said he can foresee the private rental market growing even bigger.

“Long-term renting is becoming more prevalent as a lifestyle choice,” he said. “It is already a commonplace occurrence in nations such as Germany where nearly half of all homes are privately rented. A similar trend emerging in the UK, will result in the buy to let sector continuing to swell in size.”

The majority of landlords have benefitted greatly from capital appreciation – particularly in recent months as house prices escalated. But many have also suffered void periods during the pandemic. Cuts to tax relief and an increased three per cent stamp duty on second homes have had a similarly negative effect. 

More licensing restrictions introduced

Now landlords in 11 areas of the UK will be faced with tougher buy to let restrictions. Affecting landlords in seven local authority areas in April, the new selective and additional licensing schemes will hit landlords in Bristol (two schemes), Charnwood, Durham, Ealing, Lewisham, Liverpool and Luton. 

This is highlighted by geospatial technology firm Kamma. The company’s CEO Orla Shields said they had already identified nine new schemes for 2022, meaning there will have been 20 new licensing restrictions in force during the first four months of the year. 

The cost of licenses vary between local authority areas, but landlords who fail to license their buy to let properties can face fines of up to £30,000 in some cases (especially when it comes to HMO licencing).

In addition to licenses for large HMOs, in some areas licenses are also needed for small HMOs and even standard buy to let rentals. In Liverpool around 80 per cent of the city’s privately rented properties require a licence.

Continued need for private rental properties

Meanwhile, estate agency regulatory body Propertymark say their latest research on the private rented sector highlights an increase in prospective tenants. To the extent that members have been reporting the number of tenants looking for property is 20 times higher than availability.

Despite this, the government look unlikely to make it easier for private landlords to thrive. The latest rumours include increasing capital gains tax – yet another unwelcome hit for the buy to let market.

Property is now around 20 per cent more expensive than it was before the pandemic.

That’s according to the Nationwide’s latest UK house price index, which puts the average house price in the UK at £260,000. It’s a jump of nearly £30,000 since February last year and more than £44,000 higher than in the same month in 2020.

That makes it 6.5 times the cost of the average UK take-home pay.

Inflation still to make its mark on property market

The Nationwide’s chief economist Robert Gardner, commented that he was surprised inflation hadn’t appeared to hit the property market yet. 

“The continued buoyancy of the housing market is a little surprising, given the mounting pressure on household budgets from rising inflation, which reached a 30-year high of 5.5% in January, and since borrowing costs have started to move up from all-time lows in recent months,” he said. 

“The strength is particularly noteworthy since the squeeze on household incomes has led to a significant weakening of consumer confidence.”

Property prices to drop after summer

That fall in house prices is likely towards the latter half of the year, though warn business analysts. To the extent that they could drop by as much as a tenth in a year. Those most likely to be affected are those who overstretched in order to meet the Stamp Duty deadline, together with first time buyers (for the same reason).

Karl Thompson, of think tank, the Centre for Economics and Business Research, predicts a drop of 1.5 per cent every three months from September onwards. That’s then expected to fall one per cent every year for the foreseeable future.

Andrew Wishart, of Capital Economics was more optimistic, predicted property prices would “stagnate rather than collapse in 2023.”

War in Ukraine contributing to higher UK living costs

When it comes to the cost of living, the war in Ukraine has added to petrol costs. This in turn, has caused the Bank of England to consider rising interest rates later this year, say economists. National insurance payments will increase by 1.25 per cent in April while, around the same time, energy bills are due to rise by around 54 per cent. Utility bills may even double again towards the end of the year, costing the average UK household around £3,000 per year.

‘Corrupt Russians’ with £1.5bn of property in capital

The war in Russia has also raised eyebrows over ownership of property in some of London’s swankiest neighbourhoods. These include Kensington, Chelsea and Westminster where properties can regularly cost upwards from £7 million. 

According to the not-for-profit organisation Transparency International, Russians with either links to the Kremlin or who have been linked to corruption, have £1.5bn worth of property in the UK today. Many of those property assets have been purchased via off-shore accounts, meaning it has been bought anonymously.

Upmarket estate agents Frank Knight say London was the most popular city in the world for purchasing luxury property during the first year of the pandemic. It even outsold real estate in Hong Kong and New York.

Despite the ongoing rise in the cost of living, lumped with looming energy bills, the cost of property in the UK continues to rise. 

At least that was the findings from property portal Rightmove’s House Price Index this week which showed monthly growth at 2.3 per cent – £7,800. 

Average home nudging £350,000 mark

The sum was the largest monthly increase since 2001, which is when the company began recording data. On an annual basis that works out at a 9.5 per cent increase over the past two decades. 

It brings the cost of the average home in the UK to £348,800, according to the survey’s figures, which are based on asking prices on property from 13,000 estate agencies.

London prices benefit from return to city working 

With Boris Johnson announcing the end of COVID restrictions this week, a look back at property values over the past two years since the UK first locked down in March 2020, shows an average increase for property of £40,000.

Interestingly, the end of restrictions has also been reflected in London’s property prices. They jumped by six per cent between January and February, as commuters and foreign travellers began returning to the city. It was also a 7.3 per cent increase from February 2021.

Analysts blame the shortage of available stock for pushing prices up UK-wide. That is closely followed by low mortgage interest rates (the Bank of England raised then from 0.1 to 0.25 per cent at the end of last year).

In fact, interest on the typical two-year fixed mortgage rate is expected to double in June in comparison with September 2021. That’s according to Samuel Tombs of Pantheon macroeconomics. This, the economist insisted, will certainly slow down any rising property growth.

Renters paying more for city living

But it’s not just buyers who are paying more – and particularly in London – for a new roof over their heads. According to recent findings by rival property portal Zoopla, city centre rents are up by £62 per month compared to pre-pandemic amounts.

Zoopla’s statistics also showed that demand for rental accommodation in cities was up by as much as 76% last month – that’s compared to the last four months of January. And it wasn’t just London that rents had increased in – Manchester, Liverpool, Newcastle and Edinburgh all recorded a similar increase.

Grainne Gilmore, head of research at Zoopla, said: “The flooding of rental demand back into city centres thanks to office workers, students and international demand returning to cities means the post-pandemic recalibration of the rental market is well underway.”

Increase in companies looking to lease office space

Meanwhile, office space is also coming under the radar, with many companies keen to tempt their staff back to city centre working.

An earlier report by Rightmove, looking at commercial property, reported an increase in business owners looking to lease office space. And that’s not just compared to pandemic figures (a 54 per cent jump on January 2021), but even pre-pandemic, with interest in leasing today 15 per cent higher even than in 2019.

‘Levelling Up’ is about to give certain homeowners a massive boost and at the same time potentially put a number of property developers out of business.

The government’s new agenda to improve opportunities across the UK, is already planning to making life easier for tenants by banning Section 21 evictions. 

Now regeneration plans mean householders in 96 areas across the British Isles will see the value of their property increase. That’s because the government has earmarked big regeneration plans worth £58.7bn for regional cities and towns.

Homeowners in Yorkshire to benefit most

According to research by developer StripeHomes, Yorkshire and the Humber will accrue around £9bn in improvements. East Midlands is the second biggest region to get a regeneration boost – to the tune of around £8.5bn. Scotland and the North West will both benefit by around £6.6bn each, while those who live in the West Midlands will see around £6.5bn in cash benefits. That’s because property analysts predict that regeneration in an area is likely to increase a property’s value by at least 3.6 per cent.

James Forrester, Managing Director of StripeHomes said he was glad to see from the plans that the government did indeed plan to spread the wealth.

He added: “It’s reassuring to see that the intention to spread opportunity and prosperity to all parts of the UK is there, with London taking a bit of a backseat in terms of focus.”

When it comes to individual homeowners, the developer’s research shows that those who live in Derbyshire can look forward to a boost in house prices by around £7,709. Considering there are around 439,000 homes in the areas, that means a total boost to the area’s property market of £3.4bn. Other cities to benefit include in a similar fashion include Birmingham and Gloucestershire (by £3.3bn each), Edinburgh at £2.8bn and home owners in Leeds by a total £2.8bn.

Developers to pay cost of cladding replacement

Another part of the Levelling Up agenda focuses on encouraging developers to make existing cladding on medium and high-rise buildings safer. 

To the extent that developers who don’t pay for fixing dangerous cladding may be prevented from continuing in the UK property market. That’s because they will be breaking the law otherwise. It means many leaseholders will be spared having to fork out tens of thousands of pounds for the repairs themselves.

The measure is in response to the Grenfell Tower tragedy when 72 people were killed after the fire, made worse by the aluminium composite cladding surrounding the building.

Levelling Up Secretary Michael Gove said: “We cannot allow those who do not take building safety seriously to build homes in the future, and for those not willing to play their part they must face consequences.”

The forthcoming legal amendments will be added to the Building Safety Bill. Other legislation allows leaseholders to sue developers who install defective products or materials which could endanger lives. This part of the Bill will also take historic cases into consideration ie those dating back 30 years and even when a previous payment had been made.

Halifax recorded the value of the average UK property price at £276,759 last month. 

That was a rise of 0.3 per cent on the previous month and lower than in previous months, the bank’s Housing Index showed.

Having said that, the cost of a UK property – based on the number of mortgage approvals – is an increase of £24,500 on January last year, and £37,500 higher than in January 2020. 

Meanwhile, the average UK property is selling in around 39 days. 

Property increase more than median salary

That annual increase of £24,500 is a jump of 9.7 per cent and as one property commentator pointed out, is more than the median wage for the under 30s. That makes it seem even more unlikely that a first-time buyer will be able to afford their own home without help from the Bank of Mum and Dad and/or other financial means.

Property analysts expect the rise to level out even further as time goes on, thanks to rising household bills and increased bank interest rates. Unfortunately for householders on variable mortgage rates, these are expected to increase by around one per cent this year. 

Households face biggest cost of living squeeze in 30 years

Meanwhile, the Bank of England expects inflation to rise to around 7 per cent. Then there are the huge utility costs most UK home face from April onwards. No surprise then that the coming months are being billed as ‘the biggest cost of living squeeze’ for 30 years.

Halifax managing director Russell Galley commented: “While the limited supply of new housing stock to the market will continue to provide some support to house prices, it remains likely that the rate of house price growth will slow considerably over the next year.”

So low is the amount of housing stock available – both for sale and rent – that property consultancy TwentyCi say it’s the lowest number since they started collecting data, back in 2008. 

In January this year there were 350,980 properties listed for sale throughout the UK. That was 36 per cent fewer than the same time in 2021. 

“In my living memory, we’ve never been in this situation before,” said Colin Bradshaw, managing director at TwentyCi. “The lack of supply has broken the sale and lettings markets.”

London bucks the trend – for the wrong reasons

In London, TwentyCi report the number of homes for sale today has actually increased from the past two years, at 75,470 and 71,850 respectively. That’s because there are 20 per cent more flats on the market – while people are still looking for detached and semi-detached houses (as a result of the pandemic race for space).

Richard Donnell, executive director at Zoopla says that the number of first-time buyers is also contributing to the property shortage – simply because they have no property to sell (ie put back into the market). And considering one third of homes are sold to first time buyers, that’s a big shortage. Another 10 per cent of homes, he said, are sold to property investors who then rent them out as a buy to let investment. 

Build to rent just seems to be getting bigger and bigger – both in terms of its reach across the UK housing market and its popularity.

The British Property Federation (BPF) this week revealed that construction began on more than 13,500 build to rent homes in regional cities last year. That’s not just double, but triple, the amount of provision in London (where the sector first started).

The Federation’s Ian Fletcher acknowledged the huge rise of the sector in northern towns and cities, acknowledging that it went hand-in-hand with regeneration initiatives.

“[Build to rent] is not just about increasing housing provision, it is also a major economic driver,” he said. “It helps attract and retain skilled workers, serving as a catalyst for urban regeneration.

“The strong growth of the BTR sector across the regions will support the government’s levelling up initiative and help revitalise town and city centres.”

At the same time, researchers and upmarket estate agents Savills are convinced the build to rent sector will double within the next few years. They are confident of their prediction because they’ve already seen many local authorities push through planning consent for build to rent developments, in the knowledge their own housing stock is diminishing or already diminished.

Research from estate agency Ascend Properties revealed that planning permission requests for build-to-rent units were up by as much as 52% during 2020 – the most intense period of the pandemic.

Even the middle-aged are going for Build to Rent

The demand is there too. Many young professions can’t afford to become homeowners these days, while the middle-aged like the flexibility and lack of maintenance etc responsibility that renting can bring. Understandably, they also enjoy the inbuilt benefits of build to rent complexes, such as gyms, pools, work spaces and cinema rooms. Some even come with concierges and domestic cleaning and laundry facilities.

Insurer Admiral has produced figures that show there are almost twice as many people in the UK looking to rent one of these new BTR properties, as there is accommodation. That increase to one in every ten individuals in Salford. 

‘Zoom room’ and retro caravan perks

One new build to rent facility on Liverpool’s quayside even has its own ‘zoom room’. Those renting at the former HMRC office block now redesigned and renamed The Keel, can look their best on-screen thanks to the room’s tinted windows.

In another build to rent development in north west London renters can choose to work from a retro camper van if they so wish. It’s a perk, along with the cinema room, of paying the £1,770 a month rent, plus utility bill of around £200, also monthly.

BPF figures show there are 26 per cent more build to rent units across the UK than in 2020. Property advisers CBRE calculated that a record £4.1bn was invested in the sector last year. Another 141,215 build to rent developments are currently being built, or are about to be. Cities which have seen the biggest jump in build to rent provision are Birmingham, Sheffield, Manchester and Liverpool.

A record amount of money – more than £4.1bn – was poured into the UK’s Build to Rent sector last year.

A report by property advisory CBRE reveals the amount is £500m higher than the previous record, which was set back in 2020. Analysts say around £2bn worth of deals are already in progress for 2022, with a further £2.5bn currently being marketed for investors, ensuring this will also be a bumper year. 

More UK financial institutions building property portfolios

Last year Lloyds Bank and home retailer John Lewis publicly announced they were entering the corporate landlord market. In fact, Lloyds has made no secret of the fact it intends to build up a portfolio of 50,000 rental homes by the end of the decade. Now Legal & General are also voicing support and likely to be the next big UK financial institution keen on getting a share of the sector.

The Build to Rent sector is already extremely popular with large-scale investors in both Europe and the US. A chronic housing shortage in the UK makes it look likely to expand here too. Goldman Sachs in America is already looking into the UK Build to Rent markets, as is an Australian investment bank and other European property investors.

Built to Rent sector has “plenty of room to grow”

Jason Hardman, an executive director at CBRE blames “a chronic shortage of good quality housing in the UK” for the boom in Build to Rent. 

Richard Valentine-Selsey, research analyst at property company Savills, said a lot of new entrants were attracted to the sector last year. He added that it still had plenty of room to grow. 

Average seller pocketed nearly £100,00 in 2021

Meanwhile, what of individual sellers? A report by Hamptons said the average seller in England and Wales made themselves a tidy £95,360 last year. That’s if they had first purchased their home within the past two decades.

The biggest winners were owners of detached properties, whose profit margins were around £151,840. Owners of flats were less successful, with an average profit of £54,690 in 2021. In fact, one in five sellers of flats actually made a loss on their property. This compared to one in four owners of detached houses.

But then, in the race for space last year city centre flats became the least sought-after property type. Large detached homes – especially in greener areas and in coastal resorts were prized above all other forms of real estate.

Aneisha Beveridge, head of research at Hamptons, said: “Soaring house price growth over the last 18 months has driven up the amount of money homeowners have made… House price gains are primarily driven by two factors – the length of time people have owned their home, and the point at which they bought in the housing cycle.”

London home owners still making biggest profits

London sellers made the highest gains overall, but at £197,730 this was meagre compared to previous years. Sellers in the South East made an average £121,740 and those in the East, £109,980. In the West Midlands, the average profit was £68,190, in the North West it came in at £56,910 and Yorkshire and the Humber at £53,960. Sellers in the North East made the least profit at £28,960.

Last year saw the highest rise in property prices since just before the big recession in 2006. By December 2021 they were up 10.4 per cent annually, bringing the cost of the average home to £254,822, according to figures from the Nationwide Building Society.

That annual price rise of £23,902 was in direct opposition to what was happening with the rest of the UK economy. In fact, house prices went up far higher than household incomes did (the highest discrepancy since 1983, in fact). 

Omicron boosts house price growth

Repeated lockdowns and Brexit cast negative effects on thousands of companies, many of whom are still struggling to survive – especially with the onset of Omicron. 

The variant helped to boost house prices too, with many householders reluctant to put their property on the market in December for fearing of contracting the virus.

A spokesman for upmarket estate agents Savills said they have predicted a UK-wide 3.5 per cent rise in property prices for the whole of 2022. But that is only on condition that the pandemic-induced demands for more space and a more rustic or coastal setting abates. Probably the biggest effect on house prices this year will be whether or not the gap between buyer demand and property supply grows or shrinks.

Zoopla’s analysts agree this year’s property price growth will be around the three per cent mark. Director of research, Richard Donnell, reckons there will be around 1.2m property transactions this year (compared to 1.5m in 2021). Big growth areas, he surmises, will be the east Midlands and north-west England. 

Chief lenders at the Halifax are more cautious about house price growth, predicting just a one per cent rise over the next 12 months.

Average first deposit in London is £88,000

London is expected to remain in the doldrums with lower growth of 2%. Perhaps the figure for the capital isn’t surprising when you consider that the average 20 per cent deposit for a first-time buyer in London is £88,000. The sum was calculated by Nationwide in their December report and works out at 183 per cent of average gross income per annum.

Property in Wales sees biggest price rise

Of the four nations, Wales had the biggest house price rise last year. Figures from the Office of National Statistics showed an annual jump of 15.5 per cent in October year-on-year, bringing the value of the average property in the country to £203,224. Homes at the higher end of the market were particularly popular, with one Savills estate agent saying quadruple the number of homes worth at least £1million exchanged hands last year, compared to pre-pandemic levels.

In Scotland the figure was 11.3 per cent, bringing the cost of the average property to £181,391. Northern Ireland, there was a 10.7 per cent increase, resulting in an average £159,109 figure. England was the lowest at 9.8 per cent (lower, in fact, than the UK-wide price rise figure of 10.2 per cent), with the cost of the average property in England – excluding London – hitting 285,113.

Flats are back in demand, as more people slowly start to go back to work in cities. 

Rightmove says city apartments were the most searched for properties on its portal during autumn. Analysts say the figures appear to show that prospective house hunters’ demands for more space and greener pastures is coming to an end – or at least slowing down significantly.

The statistics were revealed prior to the latest omicron spread. But it is still a sign that the market was reverting to ‘normal.’ Certainly, buyers were beginning to look to cities again, with hybrid working beginning to replace working from home.

“Although there was less demand for flats when the market reopened, with more availability than other property types, and more steady average asking price growth over the last year, flats could be a good opportunity for people looking to move or to get on to the ladder next year,” said Tim Bannister, Rightmove’s director of property data. 

Flats increase in value more than detached houses

Figures from high street lender Halifax paint a similar picture, with flats selling for 10.8% more in November compared to the previous year. Prices for detached houses had increased too – but at 6.6%, the rise was less than that for flats.

Halifax predictions are for a slowing down in price rises next year due to increased inflation affecting household incomes.

According to the government’s Office for National Statistics UK inflation was the highest for a decade at 5.1% in November.

Londoners spend record sum moving out of city

Other figures – this time by Hamptons – show that Londoner’s spent £54.9bn on properties outside of the cities this year. That was equivalent to 112,000 properties and was an increase of 62% on the previous year. The average price of property in London has increased by almost £36,000 over the last year with the figure now at £486,890. 

Mortgage lender offers seven times salary

With the easing of restrictions on the amount of money lenders could offer borrowers recently, one lender has announced particularly generous terms. Habito has said it will lend borrowers a mortgage sum of up to seven times their salary. 

If it’s a joint application then one person will have the seven multiple, while the other’s salary will be capped at five times their income. The main stipulation is that the Habito One mortgage is a fixed deal – for up to 40 years. Interest rates start at around 2.99%.

The typical borrowing rate at the moment is 4.5 times a salary although it has edged up to 5.5 times for borrowers at Halifax and HSBC.

To qualify for the Habito ‘seven times salary deal’ borrowers must work in particular professions, such as nursing, teaching, the police or fire service, and have a take home salary of around £25,000 per annum. They will also need to put down a 10% deposit.

One analyst warned that allowing borrowers to take out bigger sums could lead to a rise in house prices “in the same way the stamp duty holiday did.”