"UK rents fall for first time in a decade"

Via HPC Survivors FB group, from The Guardian:

Rents across Britain fell in 2018 for the first time in a decade, offering relief for tenants after years of inflation-busting rises. Figures from the Deposit Protection Scheme – a government-backed group that supervises tenancy deposits – showed the average rent fell by £9 (1.17%) from £774 in 2017 to £765.

The typical UK tenant spent 31% of their income on rent in 2018, a fall of 0.5% from the year before, the DPS said. The biggest percentage fall was in Yorkshire and the Humber, where the average rent dropped by £21 (3.63%) to £546. London recorded the biggest fall in cash terms, with the typical property rented at £1,294 a month, down £30 from a year ago...

Dan Wilson Craw, the director of the campaign group Generation Rent, said: “Falling rents are great news and, despite constant warnings of increases from the property industry, these figures demonstrate that landlords can’t simply demand more whenever they want to."

Exactly, well said Dan.

Here's the fun bit:

Landlords said demand from EU nationals had slowed, but insisted rents would have to rise in 2019 to claw back money lost through buy-to-let tax changes (1) and the letting fees ban (2), which comes into force in June.

John Stewart of the Residential Landlords Association said: “Rics has warned that with demand outstripping the supply of rental properties, rents could increase in 2019 by an average of 2% (3). Certainly we are seeing shrinking investment in the sector because of the extra taxes being levied on landlords."

What planet is he on?

1) There are two buy-to-let tax changes:

- tax relief for interest is being restricted, making the effective, after-tax, interest rate paid on BTL mortgages up to one-third higher. Rents didn't fall post 2008 when interest rates plummeted, why would they increase now? It might even act like LVT and encourage landlords to get homes rented out ASAP instead of long void periods, pushing down rents.

- landlords have to pay an extra 3% SDLT when they buy another home. This doesn't affect the homes they already own, so statistically has little impact. When deciding how much to pay, landlords find out the potential rent, multiply it up and deduct the SDLT. The extra SDLT pushes down prices and does not push up rents.

2) Let's assume that if letting agents can't exploit people desperate for somewhere to rent, they will bump up the commissions they charge landlords. Maybe so, but...

- there are plenty of landlords who deal with tenants directly, who will be unaffected. Some will decide that paying a letting agent even more of the rent is not worth it and will also deal with tenants directly.

- even if rents go up a tick to cover higher letting agent fees (unlikely), tenants will break even (save on letting fees, pay slightly higher rents), so no biggie.

3) What was the landlord lobby predicting a year ago?

RICS’ UK Residential Market Survey for July reports a continued drop in the number of new properties coming on to the market – the eighth consecutive quarter in which property numbers have dwindled.

It suggests that the dearth of properties on the market is a sign of the growing number of smaller-scale landlords exiting the rental market due to tougher tax rules. With tenant demand remaining strong, this had led to rising rents for tenants, with rents predicted to go up by just under 2% over the next 12 months and by up to 15% by 2023.

So they were predicting average rise 3% a year for five years. The first year was actually a fall of 1%, why don't they stick to their guns and 'predict' that rents will rise by 4% a year for the next four years, to get back to their original plus 15% claim.